Traditionally, a New York attorney general is rarely seen and almost never heard. Elliot Spitzer has changed all that with his relentless crusade to expose and prosecute corruption on Wall Street. The 1990s was a decade of dishonesty. From the White House to Silicon Valley to Wall Street, leading executives concluded that ethical behavior was a nice idea in principle—something that Grandmother might have worried about—but irrelevant to getting what one wants. Spitzer has shown us just how many people in Wall Street’s most trusted firms put aside their fiduciary responsibility, their ethical responsibility, and sometimes their legal responsibility during the nineties and betrayed ordinary investors.

Thanks to Spitzer, for example, we know that research analysts issued reports not for the purpose of educating investors but to hype stocks so as to secure investment-banking business for their respective firms. Spitzer has used his investigative power, too, to expose how some mutual funds, the most trusted investment vehicle for small investors, broke industry rules, charging wildly excessive management fees and giving well-connected investors technically legal but unfair advantages unavailable to the average Joe.

Anyone who cares about the free economy owes Spitzer a debt of gratitude. Transparent and fair capital markets are the foundation of the U.S. free enterprise system: if corruption in the system prevents an investor from forming as accurate a picture of the worth of a stock as possible, he’s more likely to invest his money unwisely; and if the average investor gets the sense that other, better-connected investors receive special perks, he’s less likely to invest at all. Through his investigations, Spitzer has increased transparency and fairness and thus benefited the public interest.

Unfortunately, Spitzer has made zero effort to clean up New York’s sleazy political culture, which harms the public interest no less grievously. Consider the state’s bond-issuing public authorities, created by Governor Rockefeller decades ago to get around the constitutional requirement for voter approval of state borrowing. These quasi-independent bodies, rampant with corruption and cronyism, have over the years issued billions in bonds for a bewildering variety of state projects, many of them dubious—massive debt that doesn’t directly show up in the state budget but that state taxpayers are ultimately responsible for.

During a little-covered appearance at a recent Citizens Budget Commission conference in Palisades, New York, Spitzer compared New York State’s use of the public authorities to hide its debt with Enron’s use of off-the-books subsidiaries to hide the money it owed. Strong words, bravely spoken. But it’s one thing to speak about the problem of the authorities at a wonk conference in an out-of-the-way hamlet; it’s quite another to take the actions necessary to end their ongoing misuse of taxpayer money.

Nor has Spitzer sought to expose sleaze in Albany. “Every time we turn over a rock in the mutual-fund industry,” the attorney general has said, “we see vermin crawl out.” He’d find something exactly similar if he turned over rocks in the New York State Legislature, where conflicts of interest are a matter of course.

To take one prominent example of such an ignored conflict: Sheldon Silver, speaker of the State Assembly, has long been associated with trial law firms and is a trial lawyer himself, yet he consistently blocks tort-reform legislation—much needed in a state where it is easier and more lucrative to sue than in many other locales across the country. Gotham taxpayers especially are desperate for tort relief. Each year, they must pony up hundreds of millions to settle the avalanche of lawsuits brought against the city. But far from squaring off with Silver, Spitzer reportedly already enjoys the speaker’s endorsement for his expected run for governor in 2006.

In sum, Spitzer seems to have one (rightly tough) ethical standard for Wall Street executives and quite another (lax) one for political insiders.

Someone might point out this double standard if Spitzer does decide to run for governor. It brings to mind an old warning: “With what measure ye mete, it shall be measured to you again.”


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