March 19, 2008

Wall Street Shouts Back!

I've been inundated with letters today in response to my WSJ letter in which I complained about the widespread cheering of Eliot Spitzer's demise as the "Sheriff of Wall Street." In my view, this man was flawed and a bully. Still, he brought a lot of very bad people to justice. It seems to me many are in denial about this plain fact. Perhaps it's just politics. I don't know. But here are a couple examples of the negative letters I've received (I've also had positive ones, none of them from Wall Street though). I'm just including the first letters and sparing you the further correspondences. I'm reprinting these two anonymously so readers can get a taste of just how deeply the disease of denial really is on this issue:
Your letter to the Wall Street Journal starts with the premise that Spitzer used his position to force criminals to justice. The premise is false. Spitzer abused his position as attorney general and New York's incredibly vague Martin Act to bully corporations into submitting to blackmail. Spitzer's prosecutions of the underlings did not generally succeed and he didn't even try to indict Hank Greenberg.

I cheered too at the downfall of this disgraceful politician.
Greetings Dr. Friedland,

I read with interest your letter to the WSJ this morning and, if the facts were as simple as you described them, then indeed I would agree with you. The reality of the situation was actually the exact opposite of what you described. We on the street were “cheering” the downfall of a consummate hypocrite whose self righteousness and zealotry were only exceeded by his sense HE was above the law. We applaud people who do “have the guts and acumen to force criminals to justice”. What we don’t applaud is children of privilege who use public office as a vehicle to engage in purposeful destruction of other people’s lives all in the interest of personal political gain. As you do not live in the NYC area, I can understand how you may not hear as much about what this man has done to others over the course of his career. The following link will offer some details on the dark side of Mr. Spitzer well beyond his sexual escapades (which I could personally not care less about). Spitzer did some good things over the course of his career, but he's not even close to the crusader for all that is good and just which you describe. Skirting campaign contribution laws and lying about it, using State Police to spy on political opponents, and engaging in witch hunts are also reflective of his true character.

An exceedingly high percentage of us “Wall St. folks” are highly ethical, highly motivated, and hard working people. We detest anyone who brings shame upon our industry and we strongly support anyone who truly strives to improve transparency and enforce ethical behavior. Without trust, we are done. My opinion is that all of Mr. Spitzer’s crusading against the evil doers of Wall St had nothing to do with his belief in the virtues of right vs. wrong, but rather had everything to do with his own personal agenda and sense of privilege.

Notice the common theme? It comes up in the others as well. It's the notion of the value of Spitzer's accomplishments somehow completely undermined by a personal agenda, abusing the power of his office, and a sense of privilege rooted in a wealthy childhood. I'm afraid all this is rather moot when the point I'm making is that this man did more than anyone to bring very powerful and respected white-collar criminals to justice. Was Wyatt Earp flawed in these ways? Certainly! Is Bat Man? Of course! 

He wasn't the morally pure Lone Ranger on a white horse. But for all his failings, he sure tried (and often succeeded) in cleaning up much of the financial establishment. To condemn him absolutely is to cynically exploit an easy opportunity to deflect attention from the real criminals on Wall Street. It's the kind of denial we still see today across the industry with respect to the sub-prime mortgage crisis. Many if not most of those who defaulted should never have been given an adjustable rate home loan and the lending banks knew they were likely to default. But instead of exercising restraint, they leveraged themselves with too much risk and when the housing bubble burst, the entire scheme unravelled. 

Many executives lost their jobs over such bad judgments. On the other hand, many more lost their shirts when they declared bankruptcy and their homes were repossessed. These defaulting borrowers were surely to blame for overextending their means. But the gatekeepers here, that is to say the banks, are the ones who made it all possible. So the culture of blatant disregard for the common good seems alive and well on Wall Street. One of the letters I received said I was calling the culture of Wall Street sociopathic. Well, that's actually not what I had intended to say at first. But now that I think about it, perhaps that's not too far off from the truth. It's in fact the case made by the excellent film The Corporation.