Bring Spitzer Back Before It's Too Late: Gary Weiss

The SEC's sudden attack on Goldman Sachs doesn't change the fact that the people whose job it is to keep an eye on Wall Street have been AWOL for too long. That's why we need Eliot Spitzer back ASAP!
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Editor's note: This is a new weekly column by Gary Weiss, an award-winning Wall Street muckraker who has written for BusinessWeek and Portfolio magazines and authored two books, "Born to Steal" and "Wall Street Versus America." Look for Gary Weiss every Monday on TheStreet.

Until Friday, it seemed like the

Securities and Exchange Commission

, the FBI, and/or the U.S. Attorney for the Southern District of New York, Preet Bharara, have all been AWOL. Then suddenly the

SEC

charges

Goldman Sachs

(GS) - Get Report

with conspiring with a short-seller to design a particularly loathsome bit of toxic-waste derivative, allegedly skinning investors alive in early 2008.

But that doesn't change the fact that the people whose job it is to catch such things have appeared asleep at the wheel for far too long. Before the Goldman charges, the media had been oozing with disgusting revelations about Lehman Brothers systematically hiding assets. Now, let's pause for a moment to consider where these revelations have originated. It's a short list: the Lehman Brothers bankruptcy trustee and media articles following up on the trustee's staggering findings.

The SEC seems to be playing catch-up. Back in 2008, when former Lehman CEO

Dick Fuld

appeared on Capitol Hill not to beg for forgiveness, as would have been appropriate, but to blame short sellers and Goldman, it was reasonable to expect that his scalp would have been dangling from a prosecutor's belt by now. Instead, he's faded away like one of Douglas MacArthur's old soldiers--while we have to read in the papers about how Lehman's asset-hiding repo scheme had been going on since 2001, and had been "materially misleading."

Now, ask yourself this question: if Eliot Spitzer were somewhere in the vicinity--and by that, I don't mean guest-hosting at

MSNBC

-- do you really think that we'd be seeing our watchdogs in such a prolonged siesta? Would it have taken Spitzer two years to pounce on Goldman -- and would Fuld have been let off the hook completely? Hell no! When he was attorney general, Spitzer used to hound Wall Streeters on far less provocation, such as when he went after Dick Grasso for cashing $140 million pay checks. Today that seems about as serious as leaving a Porsche running unattended outside wherever Grasso's mansion is located nowadays.

As the get-Grasso campaign demonstrated, Spitzer definitely pushed the envelope at times. He could be as vindictive as Bobby Kennedy when he was bearing down on Jimmy Hoffa. In other words, he's precisely the kind of mad dog you want to face off against creeps like Fuld and the hyper-compensated ex-SEC officials and lapsed prosecutors now providing legal defense for Wall Street bankers. And Spitzer is a smart cookie who was going after lending industry abuses as far back as 2003.

Instead of watching Spitzer doing what Spitzer does best, we have him on the sidelines amid an orgy of publicity about Spitzer's orgies. Hey, I'm not blaming the media for focusing on that -- it's good copy, and Spitzer has only himself to blame for his career suicide. But in the course of airing Spitzer's dirty laundry again (a disgusting image, I admit), we're forgetting the kind of good this guy could do for society.

Back in the day, Spitzer slashed and burned across Wall Street, turning the screws on financial executives like Torquemada and generally making a pest of himself. It's easy to forget that he targeted

AIG

(AIG) - Get Report

long before it was fashionable, engaging in a jihad against former CEO Hank Greenberg. He ripped into

Marsh & McLennan

(MMC) - Get Report

for bid rigging, and Wall Street analysts still break out into a cold sweat when they recall the tawdry emails he unearthed from

Merrill Lynch

analysts.

Let's not forget that it was his browbeating, arm-twisting and hair-pulling that led to the $1.4 billion settlement between regulators and ten Wall Street firms:

Bear, Stearns

,

Credit Suisse First Boston

(CS) - Get Report

,

Goldman Sachs

,

Lehman Brothers

,

JPMorgan Chase

(JPM) - Get Report

,

Merrill Lynch

,

Morgan Stanley

(MS) - Get Report

,

Citigroup

(C) - Get Report

,

UBS Warburg

(UBS) - Get Report

and

U.S. Bancorp Piper Jaffray

(USB) - Get Report

. That could have been a sample of things to come, if Spitzer hadn't been so horny and so arrogant.

Lately, Spitzer has been fighting to reclaim his reputation with a typically non-self-effacing

comeback campaign

. I say good for him. Go Eliot! I have no idea what he has in mind, but to me it's pretty obvious where this guy belongs. He has got to be someplace, anyplace, where he can scare the daylights out of Wall Street. Special prosecutor, perhaps.

Or he could take over for Preet Bharara. Sorry. Bharara is terrific at prosecuting drug gangs in the Bronx, but he has been too cautious, too slow in pursuing major Wall Street firms. Watching him prosecuting perpetrators of the Bernie Madoff ponzi scheme, the biggest financial fraud in history, is like watching an ant crawl across the lawn. So far he has been a non-factor in the Lehman and Goldman cases, and has confined himself to busting peripheral characters, such as mortgage scam artists and insider traders. He has yet to climb up the food chain to major firms, as I'm sure Spitzer would do if given half a chance.

Now, I'll admit that a case can be made that Spitzer might have crossed the line, legally speaking, in his hooker addiction. However, I don't see that as disqualifying him from the urgent need to deploy the man, like Telly Savales in The Dirty Dozen, in the fight against Wall Street crime. Yeah, using Spitzer would be fighting dirty I know, but the times demand it.

As far back as Wyatt Earp, one can find law enforcement officers who were not princes, and sometimes would even patronize brothels. Some of the leading Wall Street cops have not been choirboys. Rudy Giuliani had his flaws, to say the least. Joseph P. Kennedy Sr., the aggressive first SEC chairman, was certainly no saint.

More recently we've seen a kind of miniature Dirty Dozen emerge in the form of two convicted scamsters -- Sam Antar of the Crazy Eddie stock scam and Barry Minkow, jailed for the ZZZ Best fraud -- racking up impressive records as stock market watchdogs. You can certainly learn considerably more by reading

Sam Antar's

analysis of the accounting at one of his favorite targets,

Overstock.com

(OSTK) - Get Report

, than you can from the sycophantic media coverage.

By the way, Spitzer was a saint compared with Wyatt Earp, and I hear they haven't robbed a stagecoach outside Tombstone in quite a while. So let's stop being so prissy about Eliot Spitzer. Let's harness all that testosterone to benefit society.

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Gary Weiss has covered Wall Street wrongdoing for nearly two decades. His coverage of stock fraud at BusinessWeek won many awards, and included a cover story, "The Mob on Wall Street," that exposed mob infiltration of brokerages. He uncovered the Salomon Brothers bond trading scandal, and wrote extensively on the dangers posed by hedge funds, Internet fraud and out-of-control leverage. He was a contributing editor at Conde Nast Porfolio, writing about the people most intimately involved in the financial crisis, from Timothy Geithner to Bernard Madoff. His book "Born to Steal" (Warner Books: 2003), described the Mafia's takeover of brokerage houses in the 1990s. Wall Street Versus America (Portfolio: 2006) was a hard-hitting account of investor rip-offs. He blogs at garyweiss.blogspot.com.