Opinion: The price of hypocrisy

The deal Merrill Lynch & Co. cut with New York's attorney general didn't do nearly enough to punish the Wall Street giant for a pattern of unethical behavior that cost investors billions of dollars. The $100-million fine the firm agreed to pay sounds like a lot of money to most people, but it amounts to little more than a symbolic penalty for Merrill. The reforms detailed in the agreement go only part of the way toward restoring the integrity of the stock advice offered by Merrill's analysts. The continued reliance on investment banking fees from the corporations whose stocks Merrill is paid to analyze poses an ongoing conflict of interest.

Perhaps most galling for the investors harmed by Merrill analysts' cynical touting of stocks they privately disdained as "dogs" is the weaselly language of Merrill's would-be "statement of contrition." The firm "regrets" that some of its analysts "expressed views which at certain points may have appeared inconsistent with Merrill Lynch's published recommendations." That doesn't begin to do justice to the breathtaking greed and hypocrisy of Merrill analysts such as former boy wonder Henry Blodget, who became fabulously wealthy by promoting to investors the stocks of companies whose investment banking business Merrill sought.

Still, the New York settlement is a start. The investigation undertaken by New York Attorney General Eliot Spitzer's office lays a foundation for future action against Merrill -- and the many other Wall Street firms who have engaged in similar practices. Merrill still must deal with civil suits and a continuing investigation by federal securities regulators. If authorities stand firm, this settlement may become the first step in a process that leads to industrywide reform.

Some people have derided Spitzer as a showboat who took on this high-profile case as a way of building name recognition for a future run for higher office. If so, the nation needs more showboats. Spitzer committed his office to a thorough investigation when no other authorities seemed interested and the chances for success seemed small. His investigators unearthed the damning e-mails from Blodget and other analysts that laid bare the cynical game top Merrill executives were running. The settlement wasn't everything Spitzer or the investors he represented might have wanted, but it got the full attention of an entire industry overdue for a wakeup call.

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