I have a  personal list of four men who I think are the most dangerous men in America. They are George W. Bush, Rudy Giuliani, California Governor Grey Davis and New York State Attorney General Eliot Spitzer. In my columns I deal regularly with George W. Bush. Davis and Giuliani will have to wait their turn. Today it is time to look at the evil and wacky world of Eliot Spitzer.

My story, though, starts in the 1980s. Back then, a gentlemen by the name of Lowe wanted to publish an investment newsletter. He had one problem. He was a convicted felon, and back then all investment newsletters were regulated by the SEC. The SEC wouldn't register Lowe as an investment advisor because of his felony conviction. Lowe wasn't trying to scam anyone through his newsletter. He had learned his lesson, paid his dues to society, and just wanted to go about earning an honest buck, which the SEC was trying to stop him from doing.

So Lowe with his lawyers decided to fight the SEC in court, based on First Amendment freedom of speech grounds. And he took his case all the way to the Supreme Court (Lowe v. Securities and Exchange Commission, 472 U.S. 181 (1985)). The Court ruled in his favor, kind of. They ruled in his favor enough for him to publish his newsletter without having to be regulated by the SEC. But it was a murky and wacky ruling from the Court.

The Court ruled that because Lowe was publishing his newsletter on a regular basis, that therefore he was covered by the First Amendment clause granting  freedom of speech. The justices, in their infinite murky wisdom, never explained where in the First Amendment it says you have to speak or write on a regular basis to be protected by the First Amendment. But that is what they ruled in Lowe's case. So Lowe was able to publish his newsletter free of SEC harassment.

But the ruling had a strange effect on Wall Street. If someone wanted to write a regular newsletter on investments, he could do so. However, if you were more research-oriented and wanted to write long, detailed, thorough reports on publicly traded stocks on an irregular basis--the way research analysts generally do--well then you were still, according to the Supreme Court, required to follow SEC and state regulations and register as a broker or investment advisor.

Now to publish written research work and earn a living that way, you are going to have to sell your reports in more than one state. Since the cost to register at the multi-state and at the SEC level becomes prohibitive, the Supreme Court ruling, for all practical purposes, killed the independent research report. Thus, stock brokerage firms put out the only research reports. Since they were already registered with the SEC, they had no additional cost to putting them out, as opposed to the regulatory filing hurdles an entrepreneurial, independent research analyst would have to go through.

Except for a few independents who fly way under everybody's radar screen, don't register with the SEC and sell their research strictly to a limited group of institutional and hedge fund types, the Supreme Court, through their ruling, turned the research report business into the domain of the brokerage industry.

Now with this as background, we can quickly turn to the 1990s and the Federal Reserve and its fearless leader Alan Greenspan. Greenspan pumped money like crazy through most of the '90s, creating an epoch stock market boom which was as sure to bust as any high flying helium balloon. Once Alan Greenspan ever so slightly took his foot off the monetary growth accelerator, the bust occurred, to which we can all now attest. With the bust in the stock market, the reputation of many analysts who rode the boom ever upward also crashed. These analysts were prime meat for any unscrupulous regulator or politician to feast on. Many investors suffered great losses as they always do in these government-managed manipulations of the economy.  An evil politician would never be able to get them their money back, but he could put on quite a show for these investors by going after these analysts and blaming the whole thing on them, despite the fact that it was the government through Greenspan who really caused the boom-bust.

So at this point Eliot "I want to be like Rudy Giuliani when I grow up" Spitzer enters the picture. Spitzer is the New York State Attorney General,  a position of public profile not much different from Rudy Giuliani's one-time position as a United Sates Attorney for the Southern District of New York. Giuliani used his position to go after high profile Wall Street names such as Michael Milken, and in the process killed the aggressive takeover attacks launched with the financing of Milken and the like.

As a quick side note, Giuliani's killing of aggressive takeovers ended the fears of corporate fat cats that they would be taken over by the likes of Milken if they squandered corporate assets, and thus these fat cats were set free to go on their merry way with major splurges on themselves from high salaries to private corporate jets and everything in between, wasting corporate assets, to the tune of billions. After Giuliani's march through the district, there was no one on Wall Street left standing who could stop the fat cats and keep them in check by taking them over when they wasted corporate assets. In truth, it turns out that Giuliani was nothing more than the fat cats' soldier, a pawn , a tool.

In any case, Giuliani used the notoriety gained from "Going after Wall Street" as the springboard to launch his successful New York city mayoral campaign.

Spitzer, who appears to have very grand political ambitions but no imagination of his own, is simply using the Giuliani formula of going after Wall Street to get his name in the paper on a daily basis in front of potential voters who have lost money in the markets because of the Greenspan boom-bust.

His game plan is to go after the Wall Street brokerage industry, blame the whole boom-bust cycle on them and the fact that their research is not "independent." Since the SEC and the Supreme Court have both made it near impossible for independent research to exist, especially at the retail level, Spitzer decides to ignore all this and go after the brokerage industry anyway, as though it is somehow their damned fault that there is no independent research.

Spitzer's claim is the analysts do not put out reports independent of the company they work for. Huh? This would be a great way to run a business. The Eliot Spitzer way. Find a bunch of analysts who think the products at your company--excuse my language--are a piece of shit.  Put them on your payroll, print thousands of copies of their negative reports, send it to your sales force and your customers. And call me in a month, if your phone is still connected, to let me know if you are still in business. This would be the equivalent of me, Jack Rain, writing all the press releases for Spitzer's next political campaign. Hey Eliot, I'm ready. I'll put out some real "independent" press releases for you. Email me anytime.

Now Eliot's solution to this lack of independence is to force the brokerage industry to contribute a pool of money so that research can be independently written. A board is to choose who the best analysts are. Since the only analysts to warn about the bust were the writers in the Austrian economics tradition at Mises.org, all the money should go to them. Somehow I don't think Mises president Lew Rockwell is holding his breath for any of this money, never mind all of it. And if somehow Spitzer did try to send Rockwell some of the loot, I would love to read the letter Rockwell sends Spitzer when he sends the check back.

The solution to this whole mess is easy. You can't ever, in any product situation, get "independent" research from the company putting out the product. The research put out by a product distribution company will always, whatever the company, be the best case scenario. Product distribution companies are just that, product distribution companies. If they are not going to put out the best case scenario, who is?  

You go to independent analysts and competitors for the other scenarios. So the solution is simple: Tell the SEC to leave independent research analysts alone. Let them publish unregulated reports whenever they want, regularly or irregularly. Spitzer should understand this solution. He is a graduate of Harvard Law School and was editor of the Harvard Law Review.

But he would rather crush Wall Street, ruin some careers, maybe throw a few people in jail and climb on their bodies and wave at the masses as he plans his assault on the next political position he has his eyes on.