Text 6424, 96 rader
Skriven 2008-03-13 18:08:12 av Alan Hess
Ärende: Spitzer not all bad
===========================
Eliot Spitzer did some good in his crime-fighting days.  That doesn't mitigate
the crime he committed recently, nor does it mean he shouldn't have resigned as
NY governor, or be prosecuted if that is deemed proper.

*********

www.baltimoresun.com/services/newspaper/printedition/wednesday/business/bal-bz
.hancock12mar12,0,3865412.column
baltimoresun.com
Spitzer stood up to Wall St. piggery

Jay Hancock

March 12, 2008

Whatever Eliot Spitzer may have done in Room 871 at the Mayflower Hotel in
Washington on Valentine's Day, he was the right person at the right time on
Wall Street in the early 2000s. Of course Wall Street does not acknowledge
this.

"I have never had any doubt about his lack of character and integrity, and he's
proven me correct," former New York Stock Exchange director Kenneth Langone
told the Associated Press after Spitzer was reportedly caught on tape summoning
a hooker. (Langone was one of Spitzer's targets.)

Impugning the prosecutor, however, changes nothing about the shenanigans he
uncovered. That gleeful sound coming from Lower Manhattan yesterday? It's a
direct measure of how much Spitzer accomplished as New York's attorney general.

When Spitzer started upending rocks in 2002, America knew there was something
sleazy in corporate finance. Enron was in bankruptcy. WorldCom and other
telecom companies were imploding. People were losing homes, in some cases, on
bad bets on over hyped Internet stocks.

But it took Spitzer to unearth the pipes that transmitted Wall Street's sewage
to your brokerage account. While the Securities and Exchange Commission and
Justice Department focused on the slimy product, Spitzer went after the
dealers.

It was Spitzer who showed that analysts were recommending stocks they knew were
terrible so investment-banking colleagues could land the companies' business.

Spitzer exposed Salomon Smith Barney's Jack Grubman putting a "buy" rating on a
stock that every smart investor, Grubman admitted privately, "feels is going to
zero."

Spitzer found the e-mail from Merrill Lynch's Henry Blodget calling one stock
he had recommended "a piece of crap." (Actually Blodget said this or something
similar about numerous stocks he covered, but never in public.)

The attorney general found link after link between disingenuous recommendations
and business steered Wall Street's way. The supposed investment "experts" were
lying to American investors, and if it hadn't been for Spitzer nobody would be
any wiser.

His investigation led to a $1.4 billion settlement against Wall Street and a
permanent separation of the people who research stocks from the people who
create them.

It was Spitzer who found corruption in the mutual-fund business, used by more
investors than any other vehicle for stock investments. Strong Capital, Janus
and other companies allowed wealthy investors to rapidly move money in and out
of mutual funds. This privilege was denied to regular investors and cost them
money as transaction costs rose.

Bank of America and other companies went one better for hedge funds and other
rich clients: According to regulators, they essentially allowed trades today at
yesterday's price -- every investor's dream. That, too, hurt regular investors.
That, too, would never have come to light if not for Spitzer.

Spitzer went after computer-chip makers accused of fixing prices. He took on
music companies allegedly paying disk jockeys. And, perhaps most famously, he
confronted Langone and New York Stock Exchange Chairman Richard A. Grasso.

After it became known that Grasso would pocket deferred compensation of about
$140 million, Spitzer sued to recover much of the money. Grasso's pay was
excessive because the exchange was a nonprofit corporation, Spitzer alleged.
One year, Grasso's pay was nearly equal to the exchange's net income.

The matter is still in litigation. Spitzer's light on Grasso's pay, however,
was a public service. Not least it showed how public investors were again at
risk with Grasso's gargantuan pay being set by some of the people he was
supposed to be regulating.

In short, while other regulators played pinochle during the worst wave of
corporate sleaze in decades, Spitzer had the guts and -- yes -- the overweening
ambition to expose it at its headquarters. Now the guy is humiliated and
disgraced. But schadenfreude often says more about the people feeling it than
those it is directed against.

jay.hancock@baltsun.com

Copyright + 2008, The Baltimore Sun

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