How to Ground The Street
By Eliot L. Spitzer (published in the Washington Post)
[..] First, we must confront head-on the pervasive misunderstanding of what constitutes a “free market.” For long stretches of the past 30 years, too many Americans fell prey to the ideology that a free market requires nearly complete deregulation of banks and other financial institutions and a government with a hands-off approach to enforcement. “We can regulate ourselves,” the mantra went.
Those of us who raised red flags about this were scoffed at for failing to understand or even believe in “the market.” During my tenure as New York state attorney general, my colleagues and I sought to require investment banking analysts to provide their clients with unbiased recommendations, devoid of undisclosed and structural conflicts. But powerful voices with heavily vested interests accused us of meddling in the market.
When my office, along with the Department of Justice, warned that some of American International Group’s reinsurance transactions were little more than efforts to create the false impression of extra capital on the company’s balance sheet, we were jeered at for attacking one of the nation’s great insurance companies, which surely knew how to balance risk and reward.
And when the attorneys general of all 50 states sought to investigate subprime lending, believing that some lending practices might be toxic, we were blocked by a coalition of the major banks and the Bush administration, which invoked a rarely used statute to preempt the states’ ability to probe. The administration claimed that it had the situation under control and that our inquiry was unnecessary.
Time and again, whether at the state level, in Congress or at the Securities and Exchange Commission under Bill Donaldson, those who tried to enforce the basic principles that would allow the market to survive were told that the “invisible hand” of the market and self-regulation could handle the task alone.
The reality is that unregulated competition drives corporate behavior and risk-taking to unacceptable levels. This is simply one of the ways in which some market participants try to gain a competitive advantage. As one lawyer for a company charged with malfeasance stated in a meeting in my office (amazingly, this was intended as a winning defense): “You’re right about our behavior, but we’re not as bad as our competitors.” [..]
Mr Spitzer ends with this:
As the rules of modern capitalism are rewritten over the next year, those who benefit from the enormous flow of cash being spread throughout the U.S. economy must be expected to compete within a system of rules that creates a true market — based on sound, skilled regulation, vigorous corporate governance and transparency.
Although mistakes I made in my private life now prevent me from participating in these issues as I have in the past, I very much hope and expect that President Obama and his new administration will have the strength and wisdom to do again what FDR did.
It may just be me, but I find it very strange how he was brought down – right before the sh*t hit the fan in our economy and on Wall Street, and right before the taxpayer’s money started flowing to the banks. He was shut down, and shut up (quite effectively), and yet, he was never charged with wrongdoing. He was just disposed of — destroyed and diminished.
It sure feels like someone got the one man who could have exposed much of what was happening, and why, out of the way. It is all unfortunate.
Why WAS the Bush administration illegally spying on Eliot Spitzer’s bank transfers despite lack of any evidence he was doing anything wrong? (Question asked by Juan Cole)..
People need to ask themselves this question.
Eliot Spitzer knows how this all works, and why this is happening. He has worked harder than just about anyone in this country to fight this corruption and get to the heart of the corruption over years. I would hope that his knowledge and experience on the workings and corruption of Wall Street could still be tapped into and used to bring about the right kind of change for the good of the country.
Sadly, people aren’t focused on what Eliot Spitzer was working on, only what he did in private. The media is seeing to it. In fact, the corporate media is once again raising the story that brought him down by bringing out the prostitute at the heart of what brought him down. The timing is rather strange.., or is it? They are going to stick her in front of the cameras, and give a whole new life to that story. At a time that Mr. Spitzer is trying to speak out on the corruption in Wall Street, and what needs to happen to fix it, the only story that Americans will hear about is on “Ashley Dupre“.
Coincidence? I doubt it.. Calculated? You bet.