Time magazine was right to pick the American soldier as its Person of the Year for 2003.
After all, our soldiers have accomplished a lot. They’ve also sacrificed a great deal for the rest of us.
But I have a different Person of the Year in mind when it comes to the business and investment world: Eliot Spitzer.
You’re forgiven if the name isn’t familiar. That’s a sure sign that you’re not a crook. Or that you’re not employed in the investment industry.
Spitzer, New York’s attorney general, was honored by Time in 2002 as its Crusader of the Year. Time called him the top cop on Wall Street last year for his discovery that many financial analysts — the people investors rely on to evaluate a company’s prospects — often went easy on firms that did business with their institutions.
Apparently many of the insiders and big money investors knew what was going on and placed their money accordingly. But smaller investors paid the price when companies that had artificially been propped up couldn’t keep up appearances and collapsed, costing investors huge sums.
Spitzer changed all that with help from the Securities and Exchange Commission.
Major Wall Street firms were forced to pay $1.4 billion and to change the way analysts work and are compensated. The new regulations should help prevent further abuses.
This year, Spitzer has tackled mutual funds, opening up yet another scandal that benefited the elite and ripped off small, long-term investors — improper trading of mutual fund shares to exploit the change in prices of the securities owned by the funds.
Much of the market timing was done by officials of the mutual funds themselves, people who weren’t required to report the trades. In many cases, the trades were intended to help a few super investors who had parked large sums of money with the fund firms.
Spitzer’s revelations come at a bad time in the sense that they’ve deepened investors’ distrust of Wall Street.
People who’ve seen their nest eggs shrivel as the stock market fell over the past couple years aren’t in any hurry to hand the rest over to what looks like a gang of thieves.
But Spitzer’s crusade will ultimately make the market safer and stronger. That’s the important thing.
And it also doesn’t hurt that he continues to send business executives to jail for cooking their books.
That will also go a long way to restore faith in the system.
Another reason why I think Spitzer is the investors’ Person of the Year is that he’s done all this even though it isn’t really his job.
As attorney general of New York, Spitzer has jurisdiction over Wall Street, but the SEC is the agency that is supposed to be policing it.
An interesting article in The Wall Street Journal last week noted that the SEC has a staff of 3,000, compared with an investor protection staff of 84 in Spitzer’s office.
Yet Spitzer is the one who is uncovering the abuses.
The Journal article suggests that Spitzer succeeded where the SEC failed because the federal agency is timid and narrowly focused.
Others note that Spitzer is running for governor and suggest he’s just trying to build up a reputation as a champion of the people.
I personally don’t care why Spitzer is on a crusade to clean up Wall Street and corporate America. I just want him to keep doing it.
Mike Benbow: 425-339-3459; benbow@heraldnet.com.
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