They knew his name, of course, and what he'd been up to lately. But only a handful had ever met him in person. And having heard him speak, pretty much every one of them had a strong reaction.
The man in question was New York State Attorney General Eliot Spitzer, who has been a major player in the past year's unprecedented efforts to force the financial services industry to mend its ways. The listeners were 250 or so bankers, politicians, regulators, and others close to the industry attending American Banker's Banker of the Year Awards dinner and ceremony last Wednesday.
Despite Mr. Spitzer's prominence in the industry's affairs, few of the guests on hand arrived with a strong sense of the man who would be their keynote speaker that evening. Certainly, a degree of unfamiliarity was to be expected: The event's tilt was more toward commercial banking than toward Wall Street, which has been the segment on the receiving end of the attorney general's onslaught this year.
Not surprisingly, Democrats appeared energized by the attorney general's extemporaneous 20-minute talk. Republicans said his credibility was undercut by his political ambitions - and Mr. Spitzer did not avoid partisanship altogether in his speech. He raised some eyebrows when, in praising the corporate reform law Congress enacted this summer, he pointedly called it the "Sarbanes bill," leaving off the law's other namesake, Rep. Michael G. Oxley, the Ohio Republican who chairs the House Financial Services Committee.
"You will understand if I do not refer to it as the Sarbanes-Oxley bill," Mr. Spitzer said. "Congressman Oxley and I apparently have a checkered history, and therefore I will give all credit for that bill to Sen. Sarbanes rather than Congressman Oxley."
But in general, even those who disagreed with his views came away with a clearer sense of why many in New York consider Mr. Spitzer to be not just a legal force to be reckoned with, but a personal force.
"He is incredibly well spoken. I was impressed," said Diane M. Casey, the president of America's Community Bankers. "Do I think he has gone after a problem that needs to be addressed? Yes. But I'm not so sure his solution is the right one either. I think he is asking for too much regulation. It's very much of an overkill solution."
Mr. Spitzer structured his speech as an argument against the Chicago school of economics - in particular the philosophy that market intervention on the part of government is wrong. "I disagree with that," he said. "Sometimes there are structural problems that call out for government intervention."
But the Democratic politician was careful to endorse the power of free markets.
"I am as close as you will get to a genuine free-market voice. But I also understand something that the Chicago school has all too often failed to acknowledge: markets do indeed fail, and when they definitely fail we have to intervene."
But Mr. Spitzer outlined four areas where market power has failed to police: health care, the environment, civil rights, and financial services.
Focusing on financial services, Mr. Spitzer first hit "spinning," the practice of doling out IPO shares to executives to win lucrative investment banking business. He also took on the research analysts.
"We need a bright line, clear rule, without exception" separating analysts from bankers, he said. "We simply need to provide analysts the protection that they need to do what they know they are supposed to do, and that is to provide honest, straightforward critiques that will permit the investing public to determine whether stocks are good or bad investments."
These are two key underpinnings of the so-called "global settlement" the prosecutor is negotiating with investment banks. A third, he said, is a means of assessing an analyst's advice.
"Currently it is virtually impossible to get a good read on whether an analyst is accurate or inaccurate," Mr. Spitzer said. "So what we have proposed is that reports and recommendations of analysts, whether it is 60-90 days after reports are issued, that that information be consolidated in a way the marketplace can aggregate the data and rank analysts based on the accuracy and the wisdom of their recommendations."
Mr. Spitzer also insisted that investment banks provide, in addition to their own research, the advice of independent analysts, an idea that has already been raised during settlement talks.
Beyond these steps, he said, restoring investor confidence will require more active corporate boards and institutional investors. One idea he floated involved advising boards to seek out the investor with the largest short position on the company's stock. "If you want to get an alternative view, if you want to challenge the group think … would it not be a valuable idea to invite that person in and say to him or her, 'Tell us what is wrong with this company' ?" Mr. Spitzer said. "There needs to be an antidote to the group think that unfortunately overtook the boardroom over the past couple years."
