{"text":[[{"start":4.6,"text":"Spitzer decides he's going to go to war with Wall Street. Very brave, given his pedigree and things. And he starts off with one of the most storied and highly respected companies, Merrill Lynch. Tell us why."}],[{"start":17.16,"text":"He and his right-hand man, a guy named Eric Dinallo, have been looking into what are the conflicts of interest that might be leading banks to take public companies, and sell shares to the public, companies that basically have no business model. They literally had no way of ever becoming profitable."}],[{"start":34,"text":"They become convinced that there is something really wrong going on, where Wall Street is making so much money bringing these companies public that they are not thinking through what happens next. And they think, let's go ask Merrill Lynch for their records and see what's going on. And this seems so primitive, but back in 2001 and 2002, when they're starting to do this, people were just starting to use email as their main form of communication. There's no text, really..."}],[{"start":59.6,"text":"It's very hard for the younger generation to actually imagine this. I mean, hey, kids, if you're listening, try to imagine a world where there was not just no Instagram and TikTok, there was almost no email."}],[{"start":71.6,"text":"Right. And email has really only become the basic tool of business in the last five years. And so what he says is give me all your emails that are related to this. And it's a fishing expedition, to a certain extent, but there are these existing settlements. They know there's something."}],[{"start":86.12,"text":"And because people hadn't thought through emails, they were writing all kinds of stuff. And so basically, what's happening is the way the Wall Street money machine works is, you know, company - let's say Blue Nile, which said it was going to sell diamonds - comes to a bank and says: we want to go public."}],[{"start":102.12,"text":"The bank helps them do all the paperwork, gets paid a lot of money for this. The bank's analysts, who are writing stock reports about companies, will write: 'Blue Nile is the greatest thing ever, you should buy it because it's selling for $10 now and it'll be worth $300 next week.'"}],[{"start":117.4,"text":"And they would go on TV. This is the start of when CNBC and 24-hour cable is growing. And lots of either bored people or gullible people, including my poor grandmother, would sit and watch these analysts tout the latest stock, and then go buy it. And so my grandmother got this crush, frankly, on Henry Blodget, who was the hottest analyst of the time."}],[{"start":139.92,"text":"He was this good-looking, blue-eyed, blond-haired, Ivy League-educated guy, spoke very clearly. And he made himself famous by saying at the time Amazon was going to go from $100 to $400 per share. He was actually right about that, but he also said that about every other company."}],[{"start":158.2,"text":"And so he had this whole kind of groupie fandom out there who were retail investors who'd never really been exposed directly to this kind of stuff in their own sitting rooms, suddenly going, wow, we love this stuff, and suddenly pushing up the share prices higher and higher."}],[{"start":175,"text":"Exactly. And they were just rushing and buying everything. And what's crucial now about the fact that it's the email era is while Henry and his friends are doing this, and his competitors - it's not just him, people at every bank were doing it - they were also writing emails privately about the companies, and talking about them."}],[{"start":192.64,"text":"And there are a bunch of very salty emails that Spitzer gets his hands on, including ones where somebody asks what's the point of this company other than investment banking fees, and the answer is nothing. And Blodget would refer to a company as POS, which means piece of excrement, in his emails, and then go on TV and say you should buy it."}],[{"start":212.44,"text":"So you could actually see the hypocrisy. There's a lovely line in your book about the fact that the investigators originally thought that POS stood for something completely different, didn't they?"}],[{"start":222.76,"text":"They thought it meant positive because he was touting..."}],[{"start":226.68,"text":"POS. Yes. And it took them a while to figure out that that's what was going on. I think they actually had to get somebody internal to come tell them that."}],[{"start":234.96,"text":"So if you've ever felt confused by all the jargon that your own interns, trainees, kids are using, don't worry, you're not alone. I mean..."}],[{"start":235.46,"text":"Yeah, no, the investigators had no idea."}],[{"start":242.72,"text":"What POS stood for. So did you ever get to know Henry Blodget? Ever meet him?"}],[{"start":248.28,"text":"Actually, Henry and I were in French class together in high school."}],[{"start":251.84,"text":"Are you serious?"}],[{"start":253.8,"text":"Yes. And so we ran across each other again in the course of this case."}],[{"start":257.6,"text":"So I have to ask you the question: how was his French?"}],[{"start":261.06,"text":"I think not very good, because he's a year older than I am, and he was in my class."}],[{"start":266.04,"text":"So basically, Spitzer starts amassing this body of evidence, which shows the extreme clash between what people are saying in public and in private, or if you'd like to be blunt about it, the extreme hypocrisy. And what did he do then?"}],[{"start":279.48,"text":"BROOKE MASTERS: He opens negotiations with Merrill Lynch and says, you know, I can see that you have said one thing in public and something else in private. I think that's securities fraud. And that's actually quite powerful, particularly in the state of New York, which has... every state has a law against securities fraud, as does the national government."}],[{"start":298.48,"text":"New York's law happens to be written in a way where it's very strong. You don't have to show you were intentionally committing fraud. You just were committing fraud. And so Spitzer has this really powerful weapon, which is that if I can just show this gap, I can bring a case against you."}],[{"start":313.84,"text":"And under this law, which is from the 1920s and had not really been used, and it has never truly been tested because it's such a scary law that everybody always settles when somebody brings a - it's called the Martin Act - and he goes to Merrill and says, I have the Martin Act, I have these emails, give me a bunch of money and settle."}],[{"start":331.44,"text":"So what actually happens? Because he called the lawyers in, didn't he, in a very old-fashioned way, and tried to flip the whole sort of dynamic on them in the meeting."}],[{"start":340.88,"text":"Exactly. Normally, Wall Street has the best lawyers in New York. All the big firms work for them. They have the high-powered lawyers. But Spitzer calls them in, the lawyers for Merrill Lynch, and sits them down. He has this office where he likes... it becomes legendary in these cases."}],[{"start":355.88,"text":"He sits people down in his conference room, and there's this couch he puts the people he's going to be demanding things from on. And the couch has really soft cushions, and so you sink into it. I hate sitting in that. I used to talk to him a lot, and I hated that couch. You really feel like your knees are going to your ears."}],[{"start":376.16,"text":"And so they're already uncomfortable, and then Spitzer waltzes in. And you have to remember, he's big. He's got this big, jutting chin, and he leads with his chin. And he is aggressive, and his ears kind of stick out. And he was a pugnacious guy, and he looked pugnacious. And he goes in, like, says, you will settle or your CEO is going to end up going to jail."}],[{"start":398.92,"text":"So he's standing up while they're sitting down..."}],[{"start":401.36,"text":"I think he may have been sitting, but they're in this stupid couch, so he's definitely towering over them and leaning over them."}],[{"start":407.96,"text":"And of course, that's the very opposite of what they teach you to do on Wall Street, which is if you're on a trading desk you're actually taught to stand up so that you actually sound more confident. And all those movies about Wall Street always have people standing up and shouting at each other. So suddenly, these lawyers are sitting down like schoolkids on a couch being lectured by, essentially, Spitzer."}],[{"start":428.32,"text":"And from their point of view, this is insane. State regulators, even if they have the Martin Act, they're not supposed to be regulating securities. The SEC and Washington do that. Who is this guy, from their point of view, asking this stuff?"}],[{"start":442.24,"text":"And so they resist. And they also assume this is going to follow the usual American way of dealing with cases involving Wall Street, where basically, when the SEC does it, they say here's the case against you. You get some time to tell us why we're wrong, and we'll negotiate, and it'll take a couple of months, and it'll all be secret."}],[{"start":460.36,"text":"And Spitzer is like, I want an answer now. And they're like, no, give us some time. And they think they're going to have time. And they're going back to their client, which is Merrill Lynch and the CEO, to develop their negotiating position. They think they have time."}],[{"start":472.2,"text":"And Spitzer is saying to Dinallo: go to the courthouse and file. He's not interested in waiting. They were caught completely cold."}],[{"start":481.48,"text":"It sounds a bit like, in a funny kind of way, echoes of what, say, President Trump has done in terms of changing the tactics and communication style, and blowing up the long-established norms and traditions and just trying to use communication to get the world on his side, because the next thing that Spitzer does is go to the public, isn't he? He makes all of this transparent, much to the horror of the way that Wall Street had traditionally operated."}],[{"start":509.36,"text":"Exactly. I mean, they file a case and immediately hold a press conference. And Spitzer was really good at this. He had blow-ups of the most embarrassing emails, like the one where the analyst is writing: 'we are losing people money and I don't like it. I am not a management whore.'"}],[{"start":524.96,"text":"And so he's got those big blow-ups, and it makes for great video. So all the TV stations come. And remember, this is New York, so you have the New York Post, which can go hog wild with fun headlines. And so he's immediately washing Wall Street's dirty linen in public in a way that they completely did not expect."}],[{"start":549.88,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787999192_8764.mp3"}