- WASHINGTON (CBS.MW) - As
the last remnants of investor confidence in the integrity of the global
financial markets burned to the ground early Wednesday, the curious sounds
of a fiddle could be heard wafting over the nation's capital.
The sounds came from the House of Representatives, where the two congressmen
most responsible for oversight of the capital markets and the securities
industry were doing their best impression of Nero fiddling while Rome
burns.
At a time when the entire investing world is looking for someone to take
charge of this corporate governance mess and start slinging some white-collar
criminals into jail, Representatives Michael Oxley, R-Ohio, and Richard
Baker, R-La., decided instead to direct their venom at the only man who
has made any progress whatsoever, Eliot "Ness" Spitzer.
The Attorney General for New York State, who made a name for himself earlier
this year by revealing shocking details of how Merrill Lynch (MER: news,
chart, profile ) analysts privately scorned stocks they had recommended
to the public, and then winning a $100 million settlement from the brokerage
giant, came to testify about the crisis of confidence on Wall Street.
Instead, he was subject to a vicious browbeating by Oxley and Baker, who
are concerned that his lone wolf investigative style is cutting into their
turf, and more importantly, their media headlines. They're worried that
Spitzer's success might encourage other state regulators to take action
to protect their local constituents, at the expense of a coordinated federal
response, whatever that is.
"The piecemeal approach would take us back to 1929, before our national
market standards were established," said Oxley, chairman of the House
Financial Services Committee, in a statement after the testimony. "No
one wants to return to those days of crash-and-burn, boom-or-bust markets."
Uh, hello? Taken a look at the Nasdaq lately?
"The truth is that Eliot Spitzer is no Eliot Ness," Oxley went
on to say. "As hard as he may be trying, it takes more than slapping
on a hat to become an untouchable."
Baker, chairman of the House subcommittee on capital markets, followed
with his own statement, a patronizing and personal attack that criticized
Spitzer for creating the perception that there is a "vacuum of inactivity
in Washington" regarding the issue.
Wonder where Spitzer got that idea? Could it be the year-long congressional
probes into analysts that produced nothing but a few photo ops and a milquetoast
set of unenforceable new rules?
As anyone holding out hope that new regulations might prevent white-collar
crime now knows following the WorldCom (WCOM: news, chart, profile)
debacle, the time is past for more hearings and consultations. It's time
to put some millionaires in jail.
Spitzer, with a team of only 15 investigators in New York, has done more
in three months than Congress has done in 10 years to expose the insidious
nature of the problem on Wall Street. My only criticism of Spitzer --
voiced before in this column -- is that he let Merrill off the hook with
only a $100 million fine.
We need more state regulators going after these clowns, not less. We need
more public exposure of wrongdoing, not hearings and vague promises of
"full and fair" investigations.
The decision by the House leaders to boost the budget of the Securities
and Exchange Commission by 77 percent late Wednesday is a good start. The
SEC's filing of fraud charges against WorldCom also inspires confidence.
But the fact is that even as the likes of WorldCom, Enron and Global Crossing
blow up before our eyes in the stock market, securities industry lobbyists
are already circling the wagons against change and reform in Washington.
The proposal by Phil Purcell of Morgan Stanley (MWD: news, chart, profile
) to restrict state securities regulators from investigating Wall Street
firms is atrocious. That supposedly informed and educated congressmen
are starting to push this agenda themselves is equally appalling.
Reforms are "a good thing," to quote Martha Stewart. Reasoned
regulation is also worth pursuing, if necessary. But what investors need
now are more gumshoes like Spitzer on the case, not less.
CEOs like Purcell would much rather fly the shuttle down to Washington
every couple of years to testify at a grand hearing then have someone
going through their company's e-mails and the trashcans behind their New
York headquarters.
Let's hope Spitzer sticks to his guns. When it comes to wiping crime off
the streets, I'll take the local cops over the Feds every time.
-
- David Callaway is executive editor of CBS.MarketWatch.com.
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