Where Did All the Analysts Go?
The Wall Street Journal reminded us recently that Elliot Spitzer, then Attorney General of New York, sued and regulated them nearly out of existence on Wall Street. You know about analysts right? Those are the guys who used to evaluate companies, industries and deals to assess potential returns and risk. It turns out that there are about half as many as there used to be courtesy of the abusive suits and witch hunts investigations undertaken by Elliot Spitzer.
Do you think these guys might have raised some red flags about the risk being taken on by the financial services industry? It turns out there’s an interesting way to test this. Many of the analysts who left Wall Street now work for hedge funds. It seems that a lot of those hedge funds were the first to start shorting the stocks of the financial services companies that are now in big trouble. It seems likely that the analysts did a great job for their new employers. Just imagine what they might have been able to prevent had they still worked for those financial services companies that have tanked.
So, for anyone keeping score, let’s review government’s involvement in the current mess on Wall Street.
1. The Clinton administration loosened the rules on mortgage eligibility to encourage home ownership for all.
2. Fannie and Freddie greatly expanded their monetary exposure for the same reason.
3. Congressional Democrats blocked extensive reforms of Fannie and Freddie proposed by the Bush administration.
4. Elliot Spitzer eviscerated the very people on Wall Street whose job it was to prevent exactly what ended up happening.
And of course you’ll see none of this in the media.