Tuesday, November 18, 2003

Ambition in Albany

Eliot Spitzer attempted to land a broadside against the Bush administration yesterday in the New York Times with his piece on the impotent S.E.C. and E.P.A.

According to Spitzer, the S.E.C. let Putnam Investments off recently with a "slap on the wrist" for allowing late-trading of some of its mutual funds by certain wealthy investors, thereby reducing returns for smaller, longer-term investors. Moreover, the EPA's refusal to close pending investigations into more than 100 power plants and factories for violating the Clean Air Act betrays an abdication of responsibility.

In both cases, of course, Spitzer himself as New York Attorney General is pursuing the culprits, and in the former case seeking to impose harsher penalties.

Spitzer has been the bane of corrupt Wall St. "analysts" and mutual funds for some time, but now he is beginning to criticize the usual regulatory boards and, by extention, the Bush administration.

Although Spitzer has been accused of excessive ambition, he is making the most of an opportunity. He's not much different than Rudy Giuliani was when he was U.S. Attorney. Our government is based on allowing ambition to flourish within certain bounds, and Spitzer is a textbook case on how ambition and law enforcement (an aspect of executive power) complement each other.

Although the financial abuses Spitzer seeks to correct existed during the Clinton administrations, Spitzer is clearly trying to use them for partisan advantage. It will be interesting to see how much he is able to exploit this opening and to what extent the administration will let him.

Finally, it is interesting that Spitzer's name appears in James Cramer's entertaining memoir of his life as a hedge fund manager. Apparently Spitzer invested in Cramer's fund which used some rather unsavory tactics such as pitting analysts more interested in hyping stocks than honestly analyzing them against each other to profit. None of this is to suggest that anything Cramer or Spitzer did was illegal, although, amazingly, Cramer has admited on his show, Kudlow and Cramer, that he approached Fidelity Investments (unsuccessfully) regarding late-trading their funds when he was running money. One might think that an attorney general challenging Wall St. in the aggressive way that Spitzer has might have seen better fit to invest in an equity index fund and some muni bonds rather than a day-trading hedge fund.


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