Eliot Spitzer on ice on Wall Street and in New York State

Well, the other shoe dropped. It took a couple of days, but that naughty Eliot Spitzer finally abdicated his position as the governor of New York in the wake of the biggest personal scandal to afflict a politician since a certain blue dress. You know the story by now. Client 9, as Spitzer was allegedly known within the alleged Emperor’s Club prostitution ring, allegedly arranged for an alleged $1,000-an-hour working woman (identified as “Kristen”) to be allegedly transported across state lines. If true, that’s a violation of the Mann Act, a felony. The FBI was nosing around Spitzer, initially thinking they were investigating a simple case of graft, but what they found turned out to be much more titillating.

If Eliot Spitzer’s name rings a bell, it’s because he made one for himself while serving in Manhattan’s District Attorney’s office and as New York State Attorney General and rode the notoriety he gained to the governor’s mansion. During his tenures as top prosecutor, he made white-collar crime his personal crusade and became the scourge of CEOs everywhere. Prominently, he sued Dick Grasso (the former chief of the then-not-for-profit New York Stock Exchange) over his $187 million pay package and expedited the ouster of long-time American International Group leader Hank Greenberg while fining the company a record $1.64 billion for supposedly overstating its earnings. He levied millions of dollars in penalties on several mutual fund managers, including Bank of America, Janus, and Putnam, for charges related to illegal trading (returning the money to investors) and helped to construct a “Chinese Wall” between brokerages and investment banks at firms such as Merrill Lynch and Citigroup in order to discourage conflicts of interest.

Predictably, reactions from Wall Street to Spitzer’s demise ranged from elation to glee. Spitzer often said that he was protecting little guys from Wall Street fat cats. But the white knight apparently was wearing no armor at all.