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A great line regarding Elliot Spitzer(5 posts)

A great line regarding Elliot Spitzermoneyman
May 9, 2003 7:54 AM
The NY Attorney General who negotiated the $1.4 billion settlement with several Wall Street firms. Looks like the money is going everywhere except into the pockets of wronged investors.

From the Wall Street Journal of 5/9/03

No summing up would be complete without the biggest beneficiary, the previously unknown Mr. Spitzer. He's well on his way to a strong bid for Governor of New York. Democrats are already sizing him up as Presidential timber, and who can blame them, given this year's crop of executive balsa wood?

I think this is a serious problem...TJeanloz
May 9, 2003 11:12 AM
I don't think much of Elliot Spitzer. Not that I think much of the people he's prosecuting, but he's really gone a bit Hollywood. He's falling into a lot of the same pitfalls as the people he's nailing to crosses.

But that's not the problem I really have. I'm really displeased that these firms are paying $1.4B for misleading investors, and practically NONE of that money is going to those who were misled. This is really a roundabout tax on the middle class, who were the most impacted by the purported frauds. I think it's 100% wrong that most of this money is going directly into the general funds of the settling states (as it is in MA). Not unlike the tobacco settlement, which is being used for all kinds of wierd spending.
I agreemoneyman
May 9, 2003 12:30 PM
Not only did it hurt the investor, but also the poor schmuck on the retail side who was pitching those stocks to his unsuspecting customers. The home office sends out propaganda re: what a great stock XYZ is, now trading at 32. We think, based on industry multiples, that it has a target of 60 in a year. It goes to 50, everybody waits for 60, then it heads south. Research doesn't change its "buy" rating till it hits 2 or 3. Then it issues a "hold" and gives it a new price target of 5. And all this while the firm was underwriting new issues in the company! The clients, obviously, have been hurt. But the FA, the guy who sold the shares and runs into the client in the grocery store, now has his reputation shattered. While ML and SB have the $$$ to withstand a hit like $1.4BB, the guy in the office on Main Street, USA, takes a 40-50% cut in gross and maybe gets tossed out of production. Yet the rep will never see a nickel of the fines, and he is still seen as the crook by the client.

It's a hazardous business.

any private lawsuits to recovery money lost? nmDougSloan
May 9, 2003 12:33 PM
Lots, but most won't go anywhere...TJeanloz
May 9, 2003 12:57 PM
There are a lot of shareholder lawsuits against brokers, but most clients sign their life away when they open an account. In the vast majority of cases, there was no actual wrongdoing on the part of a related party -- as in the moneyman example above, the broker offers advice based on somebody else's advice, but the final decision rests with the investor themselves.

I think the settlement is a big racket that the states realize they can squeeze the big brokers for money. If Spitzer puts Soloman and Merrill on trial, even if they win, they'll lose a lot more than $1.4B in business.