Eliot Spitzer: Ayatollah General (Objectivist) - Eliot Spitzer became the attorney general of New York in 1999. In addition to carrying out the routine functions of that office, he has used a broad anti-fraud statute to conduct a series of aggressive and well-publicized campaigns against businesses, most notably in the financial industry.

His purpose in these campaigns has not been the narrow one of punishing law-breakers. Rather, he has sought a sweeping restructuring of the business landscape in order to make it accord with his moral vision, as though he were a religious dictator suddenly transplanted from the Middle East to Manhattan. Last December, Spitzer announced that he is seeking to become governor of New York in the 2006 election. Should he succeed, his status as a large-state governor will instantly bring him attention as a possible presidential candidate. Indeed, the talk has already begun.

Mark A. Hofman, senior editor of Business Insurance, wrote this about audience reaction to a speech Spitzer gave in Washington last January: "Many of those listening to Mr. Spitzer at that Press Club luncheon couldn't help wonder if the gaze he fixed on the audience wasn't really directed about three blocks due west on a certain white mansion."(1) Even earlier, Spitzer's father had been asked if his son would like to be president. His answer: "I think he would. It's his very nature." Before it is too late, then, the American public deserves to know: Who is Eliot Spitzer? Writing recently in the conservative Weekly Standard, Matthew Continetti suggested that Spitzer brings no ideas to his pursuit of office. "The man is an empty vessel, into which flow the aspirations of liberals, the anxieties of businessmen, and the heroic narratives of idolators."

But is that correct? It may be true that Spitzer is not a policy wonk, but he does bring ideas to his public life. If political commentators do not notice these ideas, perhaps it is because they are moral ideas rather than political ideas. Spitzer has said of the methodology he would bring to the governorship: "'We're going to need someone who can say: "Wait a minute: Here's the problem, here are the facts, here are the value judgments, here's the way we apportion burdens in getting to answers."'" To a policy analyst, that may sound vacuous. But what it seems to mean is: "I do not need a political ideology to guide me. Present me with the facts of a case and my moral ideals will tell me what the proper action is." At any rate, that is the approach Spitzer has taken during his tenure as attorney general. He has looked at the facts; he has applied his value judgments; then he has prescribed his remedies.

And what value judgments does Spitzer bring to bear when "getting to answers"? In the case of business, he seems to begin with the moral principle that self-interested behavior, such as moneymaking, is at best a merely practical activity, and if not constrained by noblesse oblige a positively malign one. Like two New York governors before him, Theodore and Franklin Roosevelt, Spitzer therefore wages war against the self-seeking, moneymaking bourgeoisie in the name of the little guy. All he asks in return is ever more power to do so. We see this moral outlook in his father's teaching that "it isn't enough just to make your own pile." We see it in his wife's remark that the "shared values" of their families involved "giving back." We see it also in Constantine's remark that, even as Spitzer was helping to found their law firm, he knew Spitzer would not be happy in private practice.

And we see it in the remark of David D. Brown IV, a Harvard Law grad, that he left Goldman Sachs to join Spitzer's office because he felt he had "totally sold out" by pursuing wealth.(19) Most especially, though, we see this moral outlook in a story told by Spitzer's Princeton roommate, Bill Taylor: "I remember when he was president of the student government. I would be woken up by Eliot's late-night screaming matches with senior university administrators. Eliot had championed the cause of striking food service workers."

Anyone who recalls the sixties and seventies—when outraged students demanded vast institutional changes "NOW!"—will have no trouble understanding the appeal Eliot Spitzer has for baby-boomers. He has created an image for himself as America's chief anti-capitalist inquisitor, not because he has thrown a lot of businessmen in jail—he very notably has not. Rather, his image is based on his outraged insistence that businessmen have fallen below the standards of his own compassionate morality and must immediately start living up to them. When lawyers for Wall Street banks were negotiating with his office, Spitzer "lit into them. '[He] was harsh, irate, yelling at times,' one of the lawyers told Time. Spitzer said he was fed up with their haggling, that they should be ashamed of what they had done to investors."

Brown describes Spitzer's office this way: "Eliot has smart people thinking, in a predatory way, Where can we do good?"(22) Yes, predatory. Spitzer's moral outlook has definite, discernible contours, and at its core are three elements that have shaped his crusades against business. First is an antipathy toward anything he perceives as greed. He may not be a socialist who wants to eliminate the pursuit of economic self-interest altogether, but he demands that self-interest be restrained and decorous—a necessary evil. Secondly, Spitzer is profoundly egalitarian in his outlook.

He assumes that conflicts of interest between the classes are manifold, and the danger of exploitation constant. With that conviction, he invariably sides with workers and small investors against the wealthy and successful. Third, and worst of all, Spitzer is a Jacobin: he is willing to sacrifice the political principles of a free society—individual rights, the rule of law, and democratic processes—when they stand in the way of his moral views. In recent years, liberals have created a bugaboo of America's religious Right, finding in it the makings of a dictatorship of virtue, such as the Ayatollah Ruhollah Khomeini introduced after Iran's 1979 revolution. This is straining at gnats while swallowing a camel: to find a genuine threat from demagogic virtue-crats, liberals need look no further than the rise of their own Eliot Spitzer.

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Eliot Spitzer - The Martin Act: In order to enforce his morality, Spitzer frequently uses an old law that allows him to criminalize behavior not obviously illegal and, by threatening business executives with prison and economic ruination, mandate such reforms as may spring from his moral sense. The law that Spitzer has employed for these purposes is New York's 1921 Martin Act, as amended in the 1950s. (Formally, it is New York State's General Business Law, Article 23-A, which includes Sections 352-359. One prosecutor says of the Martin Act: "It is one of the broadest anti-fraud statutes ever devised, at least in a democratic society." According to Nicholas Thompson, senior editor of Legal Affairs:

It empowers [New York's attorney general] to subpoena any document he wants from anyone doing business in the state; to keep an investigation totally secret or to make it totally public; and to choose between filing civil or criminal charges whenever he wants. People called in for question during Martin Act investigations do not have a right to counsel or a right against self-incrimination. . . . Now for the scary part: To win a case, the AG doesn't have to prove that the defendant intended to defraud anyone, that a transaction took place, or that anyone actually was defrauded. This outrageous law survived during decades of improvements in defendants' rights principally because attorneys general had "by gentleman's agreement" used it only against the sleaziest frauds.(26) Spitzer and his colleagues make no such distinctions. Greed is greed and should be rooted out. Of course, greed is not illegal, even under the Martin Act, but Spitzer can always count on anti-capitalist journalists to publicize any self-seeking behavior he uncovers through a Martin Act investigation.

When the resulting bad publicity hammers the company's stock price, the temptation to negotiate becomes overwhelming. And when, as often happens, an executive appears to have run afoul of the Martin Act, the desire to defend economic liberty yields to the desire to preserve personal liberty. At that point, Spitzer unveils his deal: get gentle treatment for the company and its executives—in return for a thorough-going makeover of the entire industry in accordance with Spitzer's idea of the moral. The result: a leftist scheme—which in a free society could not have been imposed at all and in a democratic society would have faced years of debate—is achieved by one self-righteous prosecutor in a matter of months, weeks, or even days. As Fortune magazine wrote in a laudatory article: "What's truly stunning is [Spitzer's] ability to force reform—to root out institutionalized sleaziness with lightning speed. . . . Congress and federal regulatory agencies such as the SEC take years, if they're lucky, to shape an industry or reshape its basic practices. . . .

Yet Spitzer, an elected official from a single state, has turned entire industries upside down." In short: "Morality NOW!" Savonarola might have said just as much. Indeed, completing the parallel with the Dominican zealot (who was also a popular hero in his day, we should remember), Spitzer not only makes business executives of targeted firms promise to reform, he also forces them to kiss the rod that has chastised them and confess that they have been moral failures, thus vindicating the superior virtue of Eliot Spitzer. Last year, evidently, one of Spitzer's corporate victims failed to appreciate how key is this ethical kowtow to Spitzer. According to the Wall Street Journal: "People privy to the talks say Marsh & McLennan has bristled at the potential statement of contrition." Finally, Marsh understood that there was no way to end Spitzer's persecutions but through self-abasement and it agreed to call the behavior in question "shameful."

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Eliot Spitzer - More Anti Capitalist Crusades: “Hi, Governor!” someone calls out to the New York State attorney general after his state-issued Crown Victoria rolls to a stop. “Not yet!” Eliot Spitzer says with a grin. He’s just arrived at the Pearl River Hilton in New York’s Rockland County, where he is to speak at an evening fundraiser for a local Democrat. It has already been a long day. Spitzer was on the street at 6:30 this morning, pressing the flesh at a subway stop in Queens on behalf of Fernando Ferrer, the Democrat who later got clobbered by Michael Bloomberg in New York City’s mayoral election. A waiting political aide asks Spitzer if he’d like a “ginger ale”—code among Spitzer’s staff for Scotch and water. Spitzer passes, and soon sets about working the ballroom—slapping backs, squeezing shoulders, giving hugs, beaming all the while. He has come a long way from the days when the New York Times wrote that “instead of kissing a baby’s cheek, he was more inclined to hand the infant a campaign flier.” When Spitzer gives a speech, his rhetoric tends to soar far above the local concerns of his constituents. Tonight is no exception. He blasts the federal response to Hurricane Katrina, then links it to what he calls Republican disdain for government itself.

“What we are seeing out of Washington is the destruction of the social fabric.When you see a government so inept, so destructive, you have to stand back and ask, ‘Why?’ We have been living through an era where the leadership of the other party has denigrated the very notion of government.” His political handlers like to talk about the “Spitzer Grand Unified Field Theory,” which posits that their man is unlike every other nationally known Democrat in one key respect: Voters think he is tough—a Giuliani-style leader in Democrat’s clothes, an alpha male willing and able to rattle the biggest, toughest CEOs. Bank of America chief Ken Lewis visited Spitzer just as his institution was getting embroiled in the recent mutual fund scandals. “It was one of the most unpleasant meetings I’ve ever been through,” Lewis said later. “It was a tongue-lashing, a total whipping.”

Spitzer’s public attacks on hype-peddling Wall Street analysts, shady mutual fund late-traders, and bid-rigging insurance brokers have led to a chorus of accusation that he is anti-business—an extrajudicial meddler who is damaging the free-market system. Not that you’ll hear anyone on Wall Street attack him publicly—they’re afraid to. But the Wall Street Journal editorial page, which calls him the “Lord High New York executioner,” has published dozens of editorials about Spitzer in the past three years, most casting him as a grave threat to capitalism. In a much-quoted remark, Thomas Donohue, president of the U.S. Chamber of Commerce, complained that Spitzer acts as “judge, jury, and executioner,” rarely taking cases to trial but instead forcing companies to settle because they can’t stand the bad publicity and the havoc his lawsuits wreak on their stock price. Donohue called this the “most egregious and unacceptable form of intimidation that we have seen in this country in a long time.”

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SPITZER UNVEILS PLAN TO ENSURE THAT MENTALLY ILL TAKE PRESCRIBED MEDICATION: In the wake of the tragedy earlier this month where a woman was killed after being pushed in front of a subway train by a mentally ill man, Attorney General Eliot Spitzer today unveiled a proposal to change state law to ensure that the mentally ill are taking their prescribed medication. Currently in New York a person must be found to be an imminent danger to himself or others before being hospitalized. Under Spitzer's "Involuntary Outpatient Treatment Act," close family members, house mates, or treatment providers -- with the support of a psychiatrist -- would be able to obtain a court order for an oupatient who has had difficulties adhering to a treatment program.

If the outpatient violated the order by going off his or her prescribed treatment, he or she could then be held for a 72-hour emergency evaluation and/or the administration of a prescribed medicine. "It is clear," said Spitzer, "that the law must be changed to protect both the public and the mentally ill from danger. The movement to deinstitutionalize the mentally ill has proven to be a double-edged sword. Most can, and do function well in society. Others, however, with severe mental illness who are not taking their prescribed medication can be a serious threat to themselves and the public." The core of Spitzer's first legislative proposal is a change in state law that would make it easier for a treating psychiatrist to monitor an outpatient's compliance with treatment and, upon learning that an outpatient is not compliant (usually because he or she has stopped taking medication), have the outpatient hospitalized for evaluation, and if necessary, forced medication.

Close to 40 other states have outpatient commitment statutes. Spitzer drew on the North Carolina and Hawaii models for some elements of his proposal. A Duke University study showed that outpatient commitment, coupled with intensive services, significantly reduced psychiatric hospitalizations and incidents of violence. Spitzer pointed out that in addition to the subway tragedy involving Kendra Webdale on January 3, in Buffalo late last year, Judith Scanlon, a state mental health care worker was allegedly killed by a client, and Jeanette Garrasi was allegedly killed by her estranged husband, who had killed their son 15 years ago. "How many more innocent bystanders like Kendra Webdale, how many more state employees like Judith Scanlon, how many more relatives like Jeanette Garrasi must die before we do something?" said Spitzer. "We must have compassion for the mentally ill. And part of compassion is knowing when people are just not competent to make their own decisions about treatment. "We no longer can release the mentally ill from institutions and then simply hope and pray that they take their medication," said Spitzer. "Because if that's all we do, we're likely to have more tragedies like the ones we've seen over these past few months." On hand for the announcement were parents of the mentally ill. Roxanne and Gui Lanquetot's 37-year-old son Serge is schizophrenic and currently living in a halfway house for the mentally ill in Manhattan.

"I think this is a wonderful idea by the Attorney General and something which should have been done a long time ago," said Mrs. Lanquetot. "Having a law like this in place may have prevented many, many tragedies over the years. "It's critically important that we ensure we get help for the mentally ill before they become dangerous," said Lanquetot. "We would never want our son to be in a condition where he would hurt others." Spitzer consulted with groups which represent the mentally ill and their families while crafting his proposal, including the Treatment Advocacy Center of Arlington, Virginia.

"This is a bold and compassionate proposal," said the group's Assistant Director, Jonathan Stanley. "We commend the Attorney General on this landmark step," said Stanley. "This legislation will help ensure that the severely mentally ill take their medications, thereby lowering the likelihood of exhibiting violent behavior. New York must stop the deadly pattern of untreated severe mental illness and enact outpatient commitment statewide." "This is an important step in the right direction," said Jean DeBow, the Vice President of the State Public Employees Federation (PEF). "It's critical that family members, psychiatrists, and caregivers be able to play a role in ensuring that the mentally ill receive the care and medication they need."

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Spitzer called a crusading, polarizing N.Y. attorney general (LA Times): NEW YORK -- Politics is not "about individuals," Gov. Eliot Spitzer said Monday. But his own legacy as a politician is inseparable from his personal style, admirers and detractors say.

During his eight years as New York state's attorney general, Spitzer took on Wall Street securities brokerages, mutual-fund companies and insurance firms -- all in the name of consumers who he said weren't being protected by other regulators. In doing so, Spitzer obtained legal settlements and brought questionable industry practices to light.

In 2003, he helped arm-twist a $1.4-billion settlement from 10 major securities firms after an investigation that uncovered embarrassing e-mails in which Wall Street analysts were dismissive of stocks that they were publicly urging investors to buy. Analysts, the evidence showed, were using positive stock ratings to help their firms win lucrative investment-banking business from the companies being rated.

Spitzer's office also exposed illegal market-timing and late trading that victimized mutual-fund investors, as well sales practices by insurance brokers that he said amounted to bid-rigging and taking kickbacks. The latter probe resulted in the resignation of the top three executives at Marsh & McLennan Companies Inc., the nation's largest insurance brokerage.

In perhaps his most publicized case, Spitzer sued former New York Stock Exchange Chairman Richard Grasso, accusing him of manipulating his board of directors to obtain pay of more than $187.5 million, an amount Spitzer called excessive and illegal. That case is pending.

Spitzer's aggressiveness earned him praise from consumer advocates and won him the governorship, but it also made him a flock of enemies -- some of whom were privately indulging in schadenfreude at Monday's turn of events. Some not so privately.

"There is a God," an unidentified trader told CNBC stock market reporter Bob Pisani.

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Eliot Spitzer - How New York's attorney general became the most powerful man on Wall Street. (Slate)

Eliot Spitzer, who is temperamentally unable to stay out of the headlines for more than 72 hours, is back in them again. Last week, the New York state attorney general accused commercial insurance companies of bid-rigging. In response, the stocks of the biggest players implicated, Marsh & McLennan and AIG, have tanked, losing a combined $38 billion in market capitalization. More alarming for the insurers, Spitzer signaled this was just the beginning of an industry-wide investigation. For when he finds a few bad eggs, Eliot Spitzer cleans out the entire coop and changes the way it is run, as Wall Street's investment banks and mutual funds have learned to their dismay.

In the past two years, in a state filled with big egos — Gov. George Pataki and New York City Mayor Michael Bloomberg on the right, Sens. Hillary Clinton and Charles Schumer on the left — Spitzer has emerged as the most consequential political figure. He may be America's most powerful politician outside Washington. He has transformed a sleepy office into the nation's dominant regulator and re-engineer of the financial services industry — all in the name of protecting consumers.

Spitzer isn't a scalp-taker, as Rudy Giuliani was when he was a prosecutor. Spitzer doesn't like taking cases to trial. Instead, he has devised a more powerful tactic: He exploits the threat of stock declines and business losses to force industries to change.

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