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Taming the Beast

Eliot Spitzer said that he was “putting a tourniquet on the bleeding” when he got Merrill Lynch, the world’s biggest brokerage, to pay $100 million in May 2002 over allegations that it published tainted research to gain lucrative investment banking business. That eventually became part of the overall $1.5 billion Wall Street settlement. The New York Attorney General, whose campaign to clean up Wall Street made America’s then top securities cop, SEC chairman Harvey Pitt, seem comatose by comparison, said investor confidence had been shattered so badly by some of the practices at major U.S. brokerages that aggressive intervention was essential. “We needed to say, wait a minute, something is broken, get this information out there, get the process of controlling this beast underway,” Spitzer said in an interview for this book.

His most potent weapon was the publication on April 8, 2002, of a large number of embarrassing emails that showed Merrill’s then star Internet analyst Henry Blodget and his staff promoting Internet investment opportunities in public while privately ridiculing the same companies, sometimes describing them as “a piece of junk” or “a piece of shit.” It was a public relations coup for Spitzer and a watershed in the public’s understanding of what had really been going on during the technology stocks bubble. It made Spitzer look like the good knight battling Wall Street’s dark forces, while creating a perception that Pitt and the politicians in Washington might be either bumbling fiddlers or compromised by previous business ties and campaign donations.


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