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How Merrill's Old E-Mails Transform the 1990s

Apr 30, 2002 |

It's astonishing how much trouble on Wall Street a state attorney general can cause when he sets his mind to it.

By leaking e-mails that reveal that Merrill Lynch & Co.'s stock analysts allowed the prospect of banking fees to cloud their judgments, and suggesting he might soon be leaking other firms' old e-mails as well, New York Attorney General Eliot Spitzer has started a trend.

Two states, California and New Jersey, announced their decision to follow Spitzer's lead and the Securities and Exchange Commission, previously wary of the whole subject of Wall Street stock market research, announced its own formal investigation.

We have arrived at the beginning of the end of a process that seems to be psychologically necessary after every stock market bust. Huge sums of money can't simply have been lost by greedy little investors. Someone must have taken them.

Merrill's e-mails provide the evidence of the ``crime,'' or at least the semblance of it. At any rate they establish beyond a shadow of a doubt that as Henry Blodget and other Wall Street analysts promoted Internet companies, their hearts were not at every moment pure.

The Speculating Public

This bid to punish people for what they did during the dot- com boom is strange to anyone who actually witnessed the dot-com boom. It ignores the texture of events.

Eliot Spitzer has proved, or thinks he has proved, that Blodget plugged stocks not because he believed in them but because he was seeking to maximize his firm's investment banking fees. And that may be true. But can he recall why investors or, more accurately, speculators bought a stock on Blodget's recommendation?

It wasn't because they thought Blodget had a genius for identifying fundamentally sound enterprises. Speculators thought Blodget's support for a company might trigger a speculative wave. They knew that investing in a company recommended by Henry Blodget was extremely risky. That's why they paid attention to him. They thought he might help them make huge speculative gains, quickly. And for several years they were right.

Fictionalizing History

Now Spitzer and his followers are recasting these same speculators as investors, simple honest folk who wanted only to preserve their hard-earned savings. They are doing this so that they may also recast Blodget and others as the sinister folks who wronged these simple investors. The events of the recent past are being, in a sense, fictionalized.

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