Best-laid plans

Eliot Spitzer, New York’s crusading attorney general, wants to become the state’s next governor.

Eliot Spitzer, New York’s crusading attorney general, wants to become the state’s next governor. As a prosecutor Spitzer has been a whirlwind of activity, uncovering corruption and misfeasance. But successful governors ought to do more than uncover problems: They should solve them as well. On this score Spitzer, who first made national headlines in 2001 when he went after conflicts of interest in Wall Street’s research business, has come up short, as Senior Editor Justin Schack shows in “Settling for Nothing,” page 26.

Spitzer brought to light abuses that led, eventually, to the high-profile tumbles of Merrill Lynch & Co. Internet analyst Henry Blodget and Citigroup telecom researcher Jack Grubman. But, Schack argues, the much-ballyhooed deal signed nearly three years ago, in which 12 brokerage firms agreed to undertake a range of reforms and pay $1.5 billion to settle charges that they had misled investors with biased research reports, has disappointed.

To date, Schack notes, none of the $943 million earmarked for restitution has been paid to investors. The federal investor education program has stumbled, and the “independent” firms that are receiving $500 million from the 12 brokerages are not, strangely, required to provide investors with clear evidence of the accuracy of their research.

“When he announced the settlement, Spitzer seemed to assure the average investor, ‘I’m looking out for you,’” says Schack. “In the process, he went beyond being an enforcer of the law to claim the mantle of regulator. Three years later, the settlement has failed to deliver much of what it promised, and he’s now saying, ‘It’s not my responsibility.’”

We’ve kept a close eye on Wall Street’s research for years, chronicling its achievements and exposing its shortcomings. In this issue we highlight the best work done by Wall Street’s analysts over the past year. The 34th annual All-America Research Team showcases those who work hard to overcome the demands of picky investors, BlackBerry-stretched days and the unintended consequences of regulatory actions.