Property Casualty Insurers Association president Ernie Csiszar has bitterly complained about New York prosecutor/gubernatorial candidate Eliot Spitzer’s unfair use of the threat of jail and trial by media against business executives. Spitzer is himself guilty of conflict of interest, but answers to no higher authority. This is perhaps the most frank and pointed protest against Spitzer recorded to date by an industry leader.
Csiszar: “Spitzer has discovered the ultimate weapon of mass destruction. It wasn’t Saddam Hussein; it was Spitzer’s corporate terrorism, the threat of an indictment, the threat of going to jail.”
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In my circle of friends, we call Spitzer “Mr. Evil.” In a related incident, I attended the AACSB annual meeting a few weeks ago and the State Farm Insurance CEO was a featured speaker.
In his talk, the CEO praised Spitzer. It was a true Public Choice moment. Here is Spitzer hamstringing the competitors of State Farm, all in the name of “honesty” and “integrity.” Mr. Evil, indeed.
As someone who interned on the 2004 Republican Attorney General race in Pennsylvania against Jim Eisenhower, a Spitzer-protege, I can confirm the validity of Csiszar’s comments. As a part of my tasks, I was to research Spitzer’s record–and I found it quite disturbing, to put it mildly. This man is dishonest, radically anti-business, and on top of that, he portrays himself as the protector of the people, against the ‘evil’ and greedy wall street firms that are, in his view, out to get the innocent people. In my view, he is the predator. In the classic liberal view of markets, the law of supply and demand will punish those firms which fail to please and serve the market. Not in New York, under Spitzer. Now its the ‘Law of Spitzer’s Demand.’ We will all be better off with this man out of public office, period. What a shame he uses public office for personal gain (but no suprise to a libertarian).
I think he’s basically doing a good job.
I see very few people trying to protect the public against the fraud of “big business”. Who else went after the big investment banking firms, and brokerage houses. If he didn’t go after the lying analysts-brokers, (like Henry Blogett…Merrill Lynch, etc) they would have gotten away completely free. Of course their punishment was a slapp on the wrist. The public lost billions because fraud on the part of these people and their phoney recommendations and manipulation.
bill
Bill,
What the stock analysts did was both legal and highly sought after by their clients at the time. No investor case brought against Wall Street firms for causing stock losses has succeeded in court.
If you don’t like a business practice, the proper way to end it is to pass legislation. Spitzer made himself the legislature and started enforcing new standards of law.
Dear J Henderson
I don’t think what they did was legal, here is a sample of some of what went on. Fraud and lying.
I hope this link works
http://www.consumerjusticegroup.com/mlemails.htm
bill
Bill,
Nothing about the emails was illegal. Courts have looked at the emails and dismissed all suits based on them. See this story:
http://www.detnews.com/2005/technology/0501/23/technology-65794.htm
The Appeals Court ruling referenced here is likely to result in the dismissal of approximately 130 other lawsuits against Merrill Lynch.
The three-judge 2nd Circuit appeals court panel upheld an earlier ruling by district judge Milton Pollack calling plaintiffs “high-risk speculators” who “now hope to twist the securities laws into a scheme of cost-free speculators’ insurance.” It further noted that Henry Blodget’s research report “adequately warned investors that the Internet companies it was recommending were “high-risk investments” with “no proven track record of earnings.”
To understand this, you have to realize that analyst ratings are based on what they think investors will want to buy in the short term, not on the long term quality of the companies or their managements. Analysts are legally allowed to have positive short term views on the stocks of risky, shoot-for-the-moon companies that may ultimately turn out to be losers. The law required Blodget to warn investors about the risk factors, which he did.
Dear J H
It’s not just the emails, that was just a sample.
Do you honestly think the firms did nothing wrong?
If the firms did nothing wrong why did they pay $1.4 billion in penalties, etc? They were not charged with fraud, they should have been, as if they were… they would have been put out of business by the lawsuits from their clients. Elliot did not want that to happen. Read this article, portion-
…Pursuant to the enforcement actions, the ten firms will pay a total of $875 million in penalties and disgorgement, consisting of $387.5 million in disgorgement and $487.5 million in penalties (which includes Merrill Lynch’s previous payment of $100 million in connection with its prior settlement with the states relating to research analyst conflicts of interest). Under the settlement agreements, half of the $775 million payment by the firms other than Merrill Lynch will be paid in resolution of actions brought by the SEC, NYSE and NASD, and will be put into a fund to benefit customers of the firms. The remainder of the funds will be paid to the states. In addition, the firms will make payments totaling $432.5 million to fund independent research, and payments of $80 million from seven of the firms will fund and promote investor education. The total of all payments is roughly $1.4 billion….
http://www.srimedia.com/artman/publish/article_547.shtml
The settlement was paid to avert criminal charges that would have shut down brokerage firms. A settlement of charges does not mean a crime was actually committed.
The analysts are only measured by being too bullish in a bear market. Nobody counts the time when they were too bullish during a bull market, and their clients benefited.
The people undoubtedly lost money not because of various business practices but because the companies they invested in were dragged in the mud and forced to pay huge settlements, thanks to Spitzer. Where is all the billions of dollars in settlement money???
On the one hand, he was very good at getting huge business to fork up millions and billions of dollars. But how is that any different from slip and fall lawyers who harass businesses large and small with law suits? The difference is Eliot Spitzer does it for fame = political power. What might be worse is the conflict of interest of this guy, going after all kinds of businesses except his former and future business, laywering.
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