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Once again, the Securities and Exchange Commission is looking worn out and toothless as it tries to clean up the messes piled high and wide on Wall Street.

This week, the SEC settled with two former Bear Stearns hedge fund managers whose funds’ collapses marked the start of the financial crisis. In 2007, the managers, Ralph Cioffi and Matthew Tannin, blew up their $1.8-billion pair of funds, and now the SEC wants them to pay a fine of $1 million.

Remember, federal prosecutors were unable to obtain a guilty verdict against Cioffi and Tannin, despite the infamous e-mail in which they wrote of the likelihood that the “entire subprime market is toast.”

Peter Lattman wrote in the New York Times: “As part of the deal with the agency, neither of the former Bear executives, Ralph R. Cioffi or Matthew M. Tannin, will admit any wrongdoing. The agency has been sharply criticized in the courts and in Congress for allowing defendants to settle fraud cases without admitting or denying the charges.”

“This case is being settled for, relatively speaking, chump change,” Judge Block said at the hearing, according to the Times. But he said he “was inclined to sign off on it.”

In turn, the SEC characterized the million dollar settlement as a “very good settlement.”

But the question is for whom was the settlement “very good.” Is it investors, the SEC or the two hedge fund managers?

Lest we forget, the collapse of the two Bear Stearns funds in June 2007 was the first shockwave in the eventual financial crisis that almost took down the entire economy along with the retirement and life savings of millions of Americans.

It is cold comfort that, after a failed criminal prosecution, the SEC would claim that a “chump change” settlement is in any way good for investors or a real punishment of wrongful activities. And yet again, the defendants were not required to admit liability - the type of settlement that would not likely pass muster with federal judge Jed Rakoff, who has rejected similar settlements with Merrill Lynch (NYSE:BAC) and Citigroup (NYSE:C).

Under the terms of the agency’s settlement with the former Bear executives, Cioffi will disgorge $700,000 in illegal gains, pay a $100,000 penalty and agree to a three-year ban from the securities industry, the Times reported. Mr. Tannin will forfeit $200,000 in illegal gains, pay a $50,000 penalty and accept a two-year ban.

Paying $1 million for blowing up almost $2 billion?

That’s not justice. That’s a mockery of justice, and the investing public deserves better.

There was also a report this week by Susan Pulliam and Michael Rothfeld in the Wall Street Journal that Henry King, a high-profile Goldman Sachs technology analyst, allegedly leaked inside information to hedge funds, potentially creating enormous ill-gotten profits for those funds.

Remember, Goldman Sachs (NYSE:GS) was never punished for the well-publicized “trading huddles” it conducted with large hedge funds clients, where trading strategies were reportedly discussed with the firm’s wealthiest clients.

At some point in the future, we expect that the SEC will go after Goldman, King and possibly the “trading huddles,” and if things work out, some “chump change” will fall to the floor. The SEC should do better, and the nation’s investors have a right to demand better.

Disclosure: Zamansky & Associates are securities attorneys representing investors in arbitration and federal and state litigation against financial institutions including Goldman Sachs, Merrill Lynch, Bank of America, JPMorgan Chase (NYSE:JPM) and Citigroup.

Source: Don't Expect Goldman Sachs To Be Significantly Punished For 'Traders Huddle'