Spitzer: S.E.C. still asleep at the switch

Former New York Governor Eliot Spitzer at a September 2009 conference

Seems like old times. 

Eliot Spitzer, who rose to national prominence in 2002 when he forced a sleepy S.E.C. to crack down on conflicted analyst research,  is none too pleased to hear that his old rivals recently joined 12 Wall Street banks in seeking to knock big holes in that wall.

Asked for his thoughts on this Wall Street Journal article that broke the news, this is what he had to tell Reuters in an exclusive interview:

“For the S.E.C. to join with the banks to diminish consumer protections with respect to the quality of advice and research is absolutely and fundamentally violative of their duty to the public.  This one more example of the S.E.C. being in in the tank.”

It’s almost as if we turned the clocks back seven years. Spitzer gained his crusading “Elliot Ness” reputation in 2002 when he took the unprecedented step of probing banks and threatening to prosecute Wall Street executives, stepping around a passive S.E.C.

Yet even after Mary Schapiro replaced the ineffective Christopher Cox as the agency’s chairman, the Feds still appear reluctant to get tough, he said.    

“Where has the SEC been in the last year? Are they dropping subpoenas and making the case for the accounting frauds we know are there, with respect to misleading statements? There’s been lot of talk at the SEC of  ’We’re rebuilding. We don’t have enough people.’ Where have they been?”

Spitzer noted investors should thank U.S. District Judge William Pauley for striking down  a proposal that would have allowed the S.E.C. and the banks to scale back reforms that discourage analysts from writing glowing research only to help their firms win lucrative banking assignments. The news, he said, reinforced his view that the S.E.C. was and remains a lousy cop.

“This has been more of the same. For them to do this is an outrage and thankfully we had a judge who said, ‘No. I wont put my name to that. The S.E.C. didn’t want to make those cases in 2002. These cases went to the heart of the integrity of Wall Street. All the cases we made have been proven to be critically necessary and not nearly enough, and the reason for that is the SEC has been asleep at the switch for a decade.”