Spitzer ’s Long Road to Redemption

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

De man die gevloerd moest worden voordat GS & Co. echt gevaar zouden lopen.
En dat werd doordat hij kennis had aan een publieke vrouw (eigenlijk
onvoorstelbaar voor Europese begrippen!)

Groet / Cees

April 7, 2010
Spitzer’s Long Road to Redemption
http://www.nytimes.com/2010/04/08/fashion/08Spitzer.html
By JAN HOFFMAN

HERE is Eliot Spitzer on MSNBC with the host Ed Schultz, railing against
fallen Wall Street titans who regain power (“absolutely insane”). There
he is on Fox’s “Good Day New York,” taking swipes at Andrew Cuomo (“he
has to answer the hard questions”) and Senator Kirsten Gillibrand (“I
don’t like politicians who vacillate”). He’s lunching regularly at power
restaurants like Michael’s (telling the waiter, “Silda wants me to have
the salad”), holding hands with his wife at charity galas, attending a
private salon at Tina Brown’s. Writing his twice-monthly Slate column,
“The Best Policy.” Teaching undergraduates at the City College of New
York, lecturing at Harvard about ethics, parsing the meaning of love on
BigThink.com.

It’s been scarcely two years since Mr. Spitzer, his ashen-faced wife at
his side, seemed to have written his political obituary, with his
taut-jawed, almost lipless grimace of resignation as governor of New
York, following disclosures that he was a client in a prostitution ring.
Now he is emphatically back, seemingly everywhere.

For public figures whose falls have been as spectacular as that of Mr.
Spitzer’s, there are many time-tested paths to image rehab. Seclusion.
Prison. Good works. The seminary.

None of those options, it seems, are for Eliot Spitzer.

“Most people faced with that kind of disgrace would disappear off the
face of the earth for a longer period of time,” said Howard Rubenstein,
the public relations impresario. “But there is a lot of curiosity about
him. And he is a publicity steamroller” — a reference to Mr. Spitzer’s
expletive-garnished self-description as a “steamroller.” “In time people
will remember his strengths and his intelligence,” Mr. Rubenstein said,
“and what he’s showing now: determination.”

During an interview this week in the Fifth Avenue offices of Spitzer
Engineering, his father’s real estate business, Mr. Spitzer, 50, relaxed
and ruddy from a family ski vacation in Utah, made it clear he was
following a different path. “The only thing I can try to do is
contribute in a small way and not in a way that is designed to get
forgiveness,” he said. “That would be too transactional: ‘I’m doing X,
now you will forgive me.’ I don’t think it can or should work that way.”

He made no apology for his pervasiveness as a pundit, first joking:
“Public speaking? I speak to myself on the street!” Then he grew
earnest. “You can view it as pure selfishness and hedonism,” he said.
“But I care about this stuff. Obviously it’s more rewarding to
participate when you can do something about it — which is why I loved
and sorely miss the jobs I had.” He glanced over at Lisa Linden, a
public relations consultant for Spitzer Engineering, whom he asked to be
present.

After his resignation, Mr. Spitzer had a self-imposed exile that lasted
about 8 1/2 months. On Nov. 16, 2008, 10 days after federal prosecutors
declined to press charges, Mr. Spitzer had an opinion article on
financial regulation published in The Washington Post. Two weeks later,
at the behest of Cliff Sloan, Slate’s former publisher and a friend from
Harvard Law School, he started his online column.

“I keep pressing the button on the Slate column,” Mr. Spitzer said,
laughing, “so it looks like I’m getting a lot of hits.”

As the first anniversary of his resignation on March 12, 2008,
approached, Mr. Spitzer expanded his audience: Fareed Zakaria on CNN,
“Today,” the cover of Newsweek.

“Eliot is like the smartest kid in the room with his hand up, but the
teacher’s not calling on him,” said his former political advertising
aide, Jimmy Siegel. “He believes he has the answers to things,
economically, and he would love to be in a position to do something
about it.”

By last fall, he was teaching at City College. He said his students told
him they didn’t watch mainstream news media, so he agreed to appear on
“Real Time With Bill Maher” on HBO.

“I always thought he’d be a good guest as the Sheriff of Wall Street
because of the financial meltdown,” said Mr. Maher, referring to Mr.
Spitzer’s nickname. “I’d seen him on shows with the de rigueur ‘Let’s
beat up on this guy before we get to what matters.’ I wanted to be the
first one to have him on a program and not bring up the scandal.”

Indeed Mr. Maher did not; by the time Mr. Spitzer was a guest again in
February, his onscreen identifier read, “Eliot Spitzer, columnist,
Slate.com.”

Mr. Spitzer said he doesn’t court appearances. “This was a process over
time of my accepting invitations from people that seemed would be fun.”

While some muscular forays — like his exchanges with Mr. Zakaria about
the absence of Wall Street transparency — may remind viewers of Mr.
Spitzer’s finer moments in government, others recall his tendency to be
tone deaf.

In February, he faced off with Stephen Colbert on “The Colbert Report.”
After Mr. Colbert recited what he said were the missteps of Ben
Bernanke, he asked Mr. Spitzer if he was surprised that Mr. Bernanke had
been reappointed chairman of the Federal Reserve, adding, “Does this
give you hope for being re-elected governor of New York?” — laughter and
applause from audience — “Because, may I remind you, he screwed everybody.”

Mr. Spitzer, laughing, answered, “I just became a big fan of Ben Bernanke.”

ELIOT SPITZER’S swift return to the bully pulpit may say as much about
us — a scandal-fatigued public’s diminishing expectations of its
officials — as it does about Mr. Spitzer’s restless inability to stay
gone. And though he professes not to have a specific strategy of image
rehabilitation in mind, whatever he is doing may be working.

In June, a poll by The New York Times, Cornell University and New York 1
News found that 26 percent of New Yorkers had a favorable view of Mr.
Spitzer; only 21 percent held favorable views of his successor, Gov.
David A. Paterson.

On “Hardball,” the Chris Matthews MSNBC program, Mr. Spitzer’s possible
political return inspired a lively debate in February. And Mr.
Rubenstein said that at a recent dinner party of 20 prominent New
Yorkers, Mr. Spitzer’s past, present and future were closely analyzed.
“Some thought he is making a play to come into elected office,” Mr.
Rubenstein said. “That didn’t get a lot of support. But they thought,
‘He’s having an influence on policy, so let’s look past that episode in
his life and appoint him as an adviser to something.’ That was the
consensus.”

But Mr. Spitzer resigned, he said, in part to repair his family. “I’ve
got a family that is intact and happy, and three kids who are
spectacular, whom I had not seen enough of in years when I was A.G. and
governor,” he said. “Is life as exciting? No,” said Mr. Spitzer,
digressing about whether to introduce bees or sheep on his upstate
property. “But I gained an awful lot that is more powerful and important.”

That said, his youngest will be a high school senior in 2012. An empty
nest looms. A return then to politics? “Why does it have to be
politics?” he said. “Is there a dynamism to that world and a theoretical
capacity to do things that draws many talented people? Absolutely. Are
there other ways to be involved and lead an interesting life? Of course.”

But each time he speaks out, doesn’t he expose his family to more
churning of his misdeeds? “I don’t do things they don’t want me to do,”
Mr. Spitzer said. “I also think you face up to your errors, deal with
them and go forward.”

The scandal shadows him still. Not only on “The Good Wife,” CBS’s show
based loosely on the imbroglio, but in The New York Post, where Ashley
Dupré, the prostitute he was linked to, is a sex columnist.

And more is coming: the just-published “The Journal of the Plague Year,”
by his former adviser, Lloyd Constantine, and later this month, “Rough
Justice: The Rise and Fall of Eliot Spitzer,” by Peter Elkind, an editor
at large at Fortune, who was editor of the campus paper at Princeton
when Mr. Spitzer was head of the student government. “That is part of
what I have to deal with,” Mr. Spitzer said stiffly, “and staying under
a rock won’t change that.”

While Mr. Spitzer maintained that he had no role model for comebacks,
there are plenty of political Lazaruses. President Nixon. Senator Ted
Kennedy, after Chappaquiddick. Representative Barney Frank, whose former
roommate ran a male prostitution ring. Bill Clinton, whose name is
rarely synonymous these days with a blue dress.

“You can be rehabilitated and make a comeback and get away with really
bad behavior,” said Doug Muzzio, a professor of public affairs at Baruch
College. “It depends on your base.” (Though many political consultants
concur that “comeback” and “John Edwards” will never appear in the same
sentence.)

What remains of Mr. Spitzer’s base remains unclear. But as lurid
memories of black socks fade, Mr. Spitzer may be the beneficiary of a
perfect storm: the populist rage at Wall Street, the troubled
administration of Mr. Paterson, and other recent sex scandals.

“There’s a dumbing down of our expectations,” said Mr. Muzzio. “When
you’ve got Mark Sanford and Rod Blagojevich, and other criminals in
state houses, what Spitzer did doesn’t look as bad. Given the barrenness
of the terrain, he may stand a little taller.”

Jeff Greenfield, the CBS political analyst, who is to interview Mr.
Spitzer at the 92nd Street Y on May 2, distinguishes the former
governor’s scandal from the more recent ones, like those of Mr. Edwards.
Mr. Spitzer, he said, took swift responsibility and did penance.

“This was legitimately a private failure,” Mr. Greenfield said. “A
serious one, that made him no longer able to be governor. If he were
trying to talk about moral rearmament, it would be appropriate to say,
‘Hold it.’ But he is talking about how to prevent another financial
meltdown, and he’s in a pretty interesting position to talk about that.”

And Mr. Spitzer may benefit from the fact that other celebrities who
behaved badly and have apologized have resumed their lives on an
expedited track. Tiger Woods is returning to golf after five months.
David Letterman kept showing up for work.

Lloyd Constantine, with whom Mr. Spitzer is no longer on speaking terms,
said he was distressed but not surprised by the ex-governor’s early
return to the megaphone. Mr. Spitzer, he said, needed to give a better
accounting for his brief gubernatorial tenure.

“Those 14 months were awful,” Mr. Constantine said. “The state was in
bad shape when he took office, it was worse when he left and it’s
continued to decline ever since.”

In the interview, Mr. Spitzer refused to speak about Mr. Constantine.
But almost instinctively, he produced an old-fashioned stump speech,
ticking off his accomplishments as governor: education, Medicaid, the
environment. He wrought his achievements, he said, by thinking outside
of the box, by ignoring conventional wisdom that said, “You can’t do that.”

Referring to his personal downfall, this reporter asked: “Wasn’t there a
voice inside you that said, ‘You can’t do that?’ ”

“Sure there was,” Mr. Spitzer replied.

“But you didn’t listen?”

Mr. Spitzer answered, “That’s a separate issue.”

The room fell silent, thick with promises both broken and unfulfilled.

At last, Mr. Spitzer spoke. “Kind of pathetic,” he said quietly. His
face reddened. “Take out ‘pathetic,’ ” he said. “ ‘It’s a shame.’ ”

How to Ground The Street
The Former 'Enforcer' On the Best Way to Keep Financial Markets in Check.
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/13/AR2008111303634_pf.html
By Eliot L. Spitzer
Sunday, November 16, 2008

President-elect Barack Obama will soon face the extraordinary task of
saving capitalism from its own excesses, much as Franklin D. Roosevelt
had to do 76 years ago. Up until this point in the crisis, policymakers
have appropriately applied the rules of triage -- Band-Aids and
tourniquets, then radical surgery -- to keep the global financial system
alive. Capital infusions, bailouts, mega-mergers, government guarantees
of unimaginable proportions -- all have been sought and supported by
officials and corporate chief executives who had until now opposed any
government participation in the marketplace. But put aside for the
moment the ideological cartwheel we have seen and look at the big
picture: The rules of modern capitalism have been re-written before our
eyes.

The new president's team must soon get to the root causes of the
mistakes that have brought us to the economic precipice. Yes, we have
all derided the explosion of leverage, the failure to regulate
derivatives, the flood of subprime lending that was bound to default and
the excesses of CEO compensation. But these are all mere manifestations
of three deeper structural problems that require greater attention:
misconceptions about what a "free market" really is, a continuing
breakdown in corporate governance and an antiquated and incoherent
federal financial regulatory framework.

First, we must confront head-on the pervasive misunderstanding of what
constitutes a "free market." For long stretches of the past 30 years,
too many Americans fell prey to the ideology that a free market requires
nearly complete deregulation of banks and other financial institutions
and a government with a hands-off approach to enforcement. "We can
regulate ourselves," the mantra went.

Those of us who raised red flags about this were scoffed at for failing
to understand or even believe in "the market." During my tenure as New
York state attorney general, my colleagues and I sought to require
investment banking analysts to provide their clients with unbiased
recommendations, devoid of undisclosed and structural conflicts. But
powerful voices with heavily vested interests accused us of meddling in
the market.

When my office, along with the Department of Justice, warned that some
of American International Group's reinsurance transactions were little
more than efforts to create the false impression of extra capital on the
company's balance sheet, we were jeered at for attacking one of the
nation's great insurance companies, which surely knew how to balance
risk and reward.

And when the attorneys general of all 50 states sought to investigate
subprime lending, believing that some lending practices might be toxic,
we were blocked by a coalition of the major banks and the Bush
administration, which invoked a rarely used statute to preempt the
states' ability to probe. The administration claimed that it had the
situation under control and that our inquiry was unnecessary.

Time and again, whether at the state level, in Congress or at the
Securities and Exchange Commission under Bill Donaldson, those who tried
to enforce the basic principles that would allow the market to survive
were told that the "invisible hand" of the market and self-regulation
could handle the task alone.

The reality is that unregulated competition drives corporate behavior
and risk-taking to unacceptable levels. This is simply one of the ways
in which some market participants try to gain a competitive advantage.
As one lawyer for a company charged with malfeasance stated in a meeting
in my office (amazingly, this was intended as a winning defense):
"You're right about our behavior, but we're not as bad as our competitors."

No major market problem has been resolved through self-regulation,
because individual competitive behavior doesn't concern itself with the
larger market. Individual actors care only about performing better than
the next guy, doing whatever is permitted -- or will go undetected. Look
at the major bubbles and market crises. Long-Term Capital Management,
Enron, the subprime lending scandals: All are classic demonstrations of
the bitter reality that greed, not self-discipline, rules where
unfettered behavior is allowed.

Those who truly understand economics, as did Adam Smith, do not preach
an absence of government participation. A market doesn't exist in a
vacuum. Rather, a market is a product of laws, rules and enforcement. It
needs transparency, capital requirements and fidelity to fiduciary duty.
The alternative, as we are seeing, is anarchy.

One of the great advantages U.S. capital markets have enjoyed over the
decades has been the view -- held worldwide -- that there was an
underlying integrity to the representations market participants made,
because the regulatory framework in which they were made was believed to
provide genuine oversight. But as we all know, the laws requiring such
integrity are meaningless without a government dedicated to enforcing them.

Second, our corporate governance system has failed. We need to reexamine
each of the links in its chain. Boards of directors, compensation and
audit committees, the trio of facilitators (lawyers, investment bankers
and auditors) whose job it is to create the impression of legal
compliance, and shareholders themselves -- all abdicated their
responsibilities.

Institutional shareholders, in particular mutual funds, pension funds
and endowments, must reengage in corporate governance. Over the past
decade, arguably the sole challenge to corporate mismanagement and poor
corporate strategies has come from private-equity firms or activist
hedge funds. These firms were among the few shareholders or pools of
capital willing to purchase and revamp encrusted corporate machines. So
it shouldn't be surprising that the corporate world has taken a
skeptical view of them -- especially short-selling hedge funds, which
have often been a rare voice raising the alarm.

Boards of directors were also missing in action over the past decade;
not only did they not provide answers, they all too often failed even to
ask the appropriate questions. And the roles of compensation committees,
of course, must be totally rethought. No longer can Garrison Keillor's
brilliant observation about our kids -- that they are all above average
-- apply to CEOs and propel failed leaders' paychecks through the roof.
Today's momentary public oversight and outrage over executive
compensation, while long overdue, is no substitute over the long term
for firm standards set by compensation committees and boards of directors.

Finally, we need to completely overhaul the federal financial regulatory
framework.

Let's leave aside the ideological hesitancy that has long hamstrung
regulatory agencies. Today's balkanized regulatory framework for
financial services no longer matches in any way the needs of a fully
integrated global financial system. The divisions of the past --
commercial banking vs. investment banking vs. insurance vs. hedge funds
vs. private equity -- have become distinctions without a difference. But
these old boxes and formalities still determine how entities are viewed
and regulated. It should surprise nobody that capital found the crevices
in the regulatory framework. That is what capital is paid to do. But we
failed to respond with a regulatory framework flexible enough to plug
the leaks.

We do not need additional fragmented areas of federal regulation to
handle hedge funds, sovereign wealth funds or derivatives. We need a
unified approach that addresses the underlying issues: what kinds of
leverage we wish to tolerate, how to measure risk, how much disclosure
various trading products should provide. We cannot survive with the
current system: the SEC, the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, the Fed, the Office of Thrift
Supervision and on and on. We must go from the Rube Goldberg structure
we now have to a sleek iPod design that is cleaner, has better operating
software and may even look good.

We began to try to craft such a unified model in New York, as did
Treasury Secretary Henry M. Paulson Jr. in Washington last year. But it
is urgent that we finish the job. Having flooded the market with cash
and seen the government take a chunk of many of our largest financial
institutions, we now need to craft the rules that will apply to all
market participants.

Three overarching priorities should guide government actions in the new
structure. First, we need better control of systemic risk. The currently
splintered federal regulatory authority, the continued presence of
off-balance-sheet transactions for financial entities (even post-Enron)
and the failure to subject major players to any government oversight
means that nobody can really understand the full risk facing the
financial system.

Second, investors must be protected with adequate, accurate information.
Firms must offer transparency both to individual investors and to
government regulators.

And third, as Eric R. Dinallo, the superintendent of the New York State
Insurance Department, has wisely pointed out, we will have to step back
from the current environment in which government has become a guarantor
of all major risk. The so-called moral hazard will serve to devalue risk
in the market, and this too will have a debilitating long-term effect on
capital flows. Only if private actors have to bear the real risks they
incur will the market function properly. We are now perilously close to
nationalizing risk.

As the rules of modern capitalism are rewritten over the next year,
those who benefit from the enormous flow of cash being spread throughout
the U.S. economy must be expected to compete within a system of rules
that creates a true market -- based on sound, skilled regulation,
vigorous corporate governance and transparency.

Although mistakes I made in my private life now prevent me from
participating in these issues as I have in the past, I very much hope
and expect that President Obama and his new administration will have the
strength and wisdom to do again what FDR did.

Eliot L. Spitzer was governor of New York from 2007-08 and state
attorney general from 1999-2006.

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