SAN DIEGO-New York State Attorney General Eliot Spitzer told a gathering of financial advisors today that the actions he has taken against Wall Street in recent years has been an attempt to "protect a free market."
   Saying government has had an important role in regulating business since Teddy Roosevelt's crusade against the robber barons 100 years ago, Spitzer said, "Is there anyone today who doesn't accept what Roosevelt did?"
   Spitzer was greeted warmly during an address at the TD Waterhouse Annual Partnership Conference in San Diego this morning, during a 45-minute address that was peppered with criticisms of the SEC, Wall Street, former SEC Chairman Harvey Pitt and former New York Stock Exchange Chairman Dick Grasso.
   He also criticized the Bush Administration for defending the status quo, declared that "self regulation has been an abject failure" and criticized voices of the free market system who "weren't living up to their own principles."
   Recalling his campaign against conflicts of interest in the research and investment banking industries, Spitzer said that one of the problems was-citing a description by disgraced telecommunications analyst Jack Grubman-that what used to be considered a conflict of interest became viewed as "a synergy."
   It also led to arrogance on the part of those involved in the scandal.
   Spitzer recalled during one negotiating session, a Wall Street investment bank lawyer turned to him and said, "Eliot, be careful, we have powerful friends."
   Spitzer said his reply "was what Vice President Dick Cheney said on the floor of the Senate to Sen. Pat Leahy."
   He added, "About a week later, when their market cap dropped about $11 billion, I was tempted to call them and say, 'Where are your friends now?'"
   He also recalled being stunned by a Merrill Lynch attorney's response to the probe: "Eliot," the attorney said, "you're right, but we're not as bad as our competitors."
   It was the type of excuse, he noted, that not even his teen-age daughters were apt to try.
   Harshly critical of the SEC, Spitzer told of how, after it became obvious how analytical work on Wall Street had been subverted by business interests, he sought the help of former SEC Chairman Harvey Pitt.
   Pitt's response, he said, was to convene a meeting with the heads of the five big bulge-bracket firms that dominated investment banking and underwriting. Noting that Grasso also attended the meeting, Spitzer added, "the reason why the NYSE is a not-for-profit organization is because Mr. Grasso took all the profit."
   In another jab at the SEC, Spitzer noted that his office's work the past four years has been done with a staff of 15 lawyers. The SEC, he noted, has a staff of thousands.
   The institutional resistance to regulatory change has been enormous, according to Spitzer.
   He expressed concern that the business community is still resisting attempts at transparency in the marketplace, noting as one example attempts by the U.S. Chamber of Commerce to oust SEC Chairman William Donaldson.
   He drew raucous laughter from the crowd when he recalled a Wall Street Journal editorial that came during a probe of bid-rigging in the insurance industry.
   He quoted the editorial as saying, "In the post-Enron era, bid rigging is unacceptable," which had Spitzer wondering about the newspaper's stance on bid-rigging before Enron.

-Evan Simonoff