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It is too easy to say that the average American expects law-breakers to go to prison or at least receive extreme punishment. Neither of those things happened in the SEC settlement with Goldman Sachs Group (NYSE: GS). Goldman did not have to admit to any crime. Its settlement costs were, by the standards of its balance sheet, very modest. By some estimates, the penalty is about two weeks worth of profit at the big investment bank.

The Securities and Exchange Commission is supposed to represent the interests of the public by enforcing regulations and laws aimed at curtailing abuses by public companies and financial firms. The Goldman settlement did none of that, at least as far as most people can see. It was a slap on the wrist of a company where many managers make millions of dollars and the CEO, Lloyd Blankfein, makes tens of millions. He did not lose his job. His position at the top of the firm may be cemented, actually, because he was the leader of the company when it dodged what could have been harsh penalties.Americans are used to seeing the SEC charge companies with abuses which seem awful by most standards. But the powerful often get away. Bank of America Corporation (NYSE: BAC) was charged by the SEC with concealing from shareholders the way some Merrill Lynch management was paid as the huge bank took over the brokerage. A judge challenged the settlement, but B of A eventually ended the matter for $150 million

The SEC brought charges against dozens of companies in 2006 for backdating options. One of those companies was Apple Inc. (NASDAQ: AAPL). There was some evidence that Steve Jobs knew about the activity. Apple’s CFO resigned. Jobs was not punished. As a matter of fact, most of the companies that were originally charged paid no penalties and their managements stayed in place.

The public has now watched for at least five years the SEC being relatively lenient in its treatment of wrongdoers. The agency was criticized for its inability to detect many of the problems that caused the credit crisis and its failure to detect illegal activity by Bernard Madoff earlier than it did. The agency said it would reform itself and become a more effective investigator and prosecutor with the help of The Justice Department. The Goldman settlement sends the message that those promises were not true.

Most Americans believe that they will be punished for breaking the law. They see people pay fines and go to prison every day. The charges and settlement in the Goldman Sachs case may be too complex for all of them to grasp entirely, but in their minds nonetheless, it is unfair.

Douglas A. McIntyre