topic by
John Calvin
5/15/2002 (13:34) |
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The Two Faces Of Wall Street
Making Al Capone Look Like A Two-Bit Mugger
During the Internet boom, Wall Street sold Main Street a dream: anyone could invest and profit like a professional stock picker. High-tech CEOs, stock analysts, and day-traders became heroes. When analysts from Merrill Lynch or Morgan Stanley (or Joe’s Garage) talked, we listened. The media -- especially CNBC, MSNBC, and CNN -- were so enamored that they forgot skepticism and became mere megaphones for the hucksters. Lured by the hype, small investors jumped in ... and got hammered.
Now it looks like much of the boom was built on fiction -- analysts were publicly recommending stocks that, in private, they derided. E-mail messages unearthed by New York Attorney General Eliot Spitzer show one Merrill Lynch analyst calling a company 'such a piece of #@&#' in private while, in public, he kept a 'buy' recommendation on its stock. Other e-mails hint at the reason why: Nothing interesting about this company, reads one, 'except the banking fees.'
In other words, respected Wall Street firms had an incentive to boost certain stocks -- those belonging to investment-banking clients who were paying the firms millions in fees.
When the bubble burst, investors lost money that could take years to recover, if it ever does. It makes Al Capone look like a two-bit mugger -- but we haven’t heard it all yet. The inquiries are expanding.
The Securities and Exchange Commission, Congress, and the Justice Department have finally taken notice. Their tardy concern is neither surprising nor comforting. Wall Street has many friends in Washington. In 2000, securities and investment firms gave over $92 million to federal candidates, only slightly favoring Republicans over Democrats. Watch how well this patronage insulates Wall Street from real reform.
Washington’s regulators and their political overseers might bark, but nothing softens their bite as well as wads of cash.
Published: May 14 2002
TomPaine.com
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