|  | | 2007 News and Press Releases | | |
HEADLINE NEWS:
Another New York Attorney General Starts a Wall Street Crusade
Jenny Anderson
The New York Times. December 7, 2007
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EXCERPT: IT’S beginning to feel a lot like Spitzer. Andrew M. Cuomo, New York’s attorney general, has been handing out subpoenas to Wall Street in an effort to find out how banks bought subprime home loans and packaged them into complex securities. His inquiry conjures up memories of Eliot Spitzer, who as New York’s previous attorney general took on Wall Street after the technology stock boom went bust. Mr. Spitzer, now governor, began his crusade by looking into tainted stock research and ended up delving into the arcane world of reinsurance. His crusade even extended to a debate over who could gain access to the cancer records of Maurice R. Greenberg’s dog. (Mr. Greenberg is the former chief executive of the insurance giant A.I.G.) There are more than a few similarities between Mr. Spitzer’s research raid and Mr. Cuomo’s mortgage mission. Both focus on products — tech stocks, in Mr. Spitzer’s case, and mortgage securities, in Mr. Cuomo’s — that started out small and ended up everywhere. At the heart of both inquiries is what Wall Street knew, and what it really thought, about the securities it was peddling. But there is a critical difference between the credit mess of 2007 and the technology meltdown of 2000. When dot-coms like Pets.com bombed, the investing public could watch the stock prices plummet tick by tick on exchanges. That is not the case with the tricky mortgage-linked investments that have soured lately. These investments are not traded on an exchange. In fact, investors often have to go to the banks that sold them the securities to get prices. And those banks may or may not be sitting on large stockpiles of the same securities. … If he digs deep enough, Mr. Cuomo may find some e-mail messages, instant messages or maybe even phone text messages that mention the deteriorating quality of mortgages. He might even find some disparaging remarks about the eager, yield-hungry investors, sometimes known as “dumb capital” on Wall Street. And perhaps there will be some comments about the complexity of subprime-linked securities and the willingness of rating agencies to give these investments platinum ratings. If that happens, it will be Mr. Cuomo, not Mr. Spitzer, who will be cast as the Scrooge of Wall Street. Bankers will say he is just another overly zealous prosecutor out to undermine America’s capitalistic dynamism. By then, of course, Wall Street’s next boom should be just getting under way. |
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