<HTML>In a message dated 12/24/02 5:55:03 PM Eastern Standard Time, mpollak@panix.com writes: <BLOCKQUOTE TYPE=CITE style="BORDER-LEFT: #0000ff 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px">I'm curious Nomi, which part do you disagree with?  Krugman concedes up front that the fines were nothing.  He basically praises Spitzer for putting all this stuff in the spotlight and stoking people's outrage. And I think one has to concede Spitzer that.  He did generate headlines.</BLOCKQUOTE> There's a lyric from the original musical score of Evita in which the character Che Guevara reflects on the spectacle surrounding Eva Peron: "She didn't say much, but she said it loud." Size of fines aside, whether Spitzer turns out to have been good or bad for individual investors can only be ascertained during the next major rally - when rule bending, grand-scale regulatory neglect and starry-eyed euphoria collide again. Spitzer's affair with the spotlight focused almost solely on one aspect of corporate and Wall Street collusion - the role of the analyst, not the role of the companies themselves in concocting the deals that the analysts touted. In doing so, and negotiating a settlement that avoided corporate culpability, he effectively closed the door on deeper inspection. Let me give one example (of many possible ones) of how no change really occurred because the real guilty parties weren't even tried: the latest mega-merger in cable - ATT Comcast. It was approved by the FCC on 11/13. In it, Comcast bought the ATT Broadband division from ATT in a $29bln all stock deal (the deal was valued at $70 bln last year, but Michael Powell, head of the FCC didn't consider that 59% value drop as a danger sign. Maybe he hasn't noticed how plummeting market values have given rise to escalating fraud disclosures.) Anyway, the deal bagged 4 banks $221mln in fees. One of them was Goldman Sachs. Goldman Sachs (and others) provided financial opinions to the SEC and FCC to get the deal done, a standard practice. (A group of consumer groups were against the deal, but were, as usual ignored.) Goldman said it was a great merger. Three years ago, Goldman sold ATT that same ATT Broadband division. They said that was a great merger, too. That deal bagged $100 mln in fees. The process of banks flipping companies for stock lined the bubble way more than giving CEOs hot shares. There's no doubt that Spitzer was able to take advantage of a situation of widespread fraud and rapaciousness. Krugman says, "You have to admire (his) style." I don't, especially . He's a politician who took advantage of a brilliant opportunity to model himself as a crusader. After years in the background, he worked the spotlight and landed fawning media attention from Forbes to The Nation -- not unlike Jack Grubman, Bernie Ebbers, Gary Winnick or Ken Lay did in the late 90s. I disagree with Krugman's depiction of Spitzer as having achieved "more than anyone could have expected." I think Spitzer achieved exactly what he wanted to and what he achieved merely scratched the surface. The deeper problem of this period lies beyond the persuasive powers of the analyst, powers that pale in comparison to those of the investment bankers, banks, corporations and legislators who furnished the enabling regulatory environment that Spitzer ignored. For instance, I didn't hear him denounce Glass Steagal repeal very often. I'm not disputing that Jack Grubman was a 'dangerous' man, albeit a danger overpromoted by the media. Harvey Litt (not Pitt) was equally dangerous, but no one's ever heard of him.  Litt worked for Salomon Brothers, one of an army of retail brokers who are the direct connections between Salomon Brothers, Merrill Lynch, etc. and the public. Litt's the guy who sells the promise of explosive stock to middle class consumers and pensioners trying to stretch their personal finances to afford things like healthcare, the people who accept his title of financial advisor. Litt sells WorldCom stock to people who've never heard of WorldCom because Salomon Brothers has it on their 'axe list' and he gets higher commissions for selling axes. Harvey calls his 'clients' to double down when WorldCom sinks, but stops answering his phone when WorldCom breaks below $10. Spitzer never got any bank / asset management firm to admit to that conflict of interest, i.e. (Citicorp via) Salomon Brothers is the same company that effectively creates Worldcom, hypes Worldcom and owns the network to distribute WorldCom to individual investors.  This is the conflict of interest that remains untouched by Spitzer's efforts. So, beyond the fines, what did Spitzer do? Here are two of the most covered 'reforms': 1) He got the practice of 'spinning' hot IPO stock banned.  That's no big deal, I can think of any number of ways to get around direct offerings. 2) He got Wall Street firms to disclose that they may have relationships with the companies that they are researching. This is another non-starter. You know what the language used on research reports is now? 'Bank ABC may have an investment banking relationship with Company XYZ for which they are receiving fees.'  If Spitzer was so big on relationship disclosure, how about having banks also include - 'and the fees we are receiving this year total $xxx million. Company XYZ is our second largest energy client. We did y deals for them this year....' I could go on. The point is that by grabbing the limelight and settling for shallow changes, Spitzer may have done nothing more than set up an elaborate smokescreen for continued malfeasance by Wall St firms. Nomi </HTML>