Andrew Cuomo, Merrill Lynch, AIG & The Martin Act: So What?

It seems that New York Attorney General Andrew Cuomo has kept himself in the headlines since December, what with his tantrums over Merrill Lynch's early bonuses and, now, AIG's recent contractual bonus payments.

I don't know if Cuomo is married and, if he is, he cheats on his wife. But in every other respect, he sure does resemble his predecessor, Eliot Spitzer, in grandstanding over financial sector activities taking place in his state.

We all know about New York's Martin Act. Well, perhaps I should write that we have all heard about it- til we're sick enough to vomit- but may not know its details. The link to the New York Observer article provides sufficient shorthand explanation for my purposes.

Back in 2001, Spitzer trained his Martin Act guns on various brokerage analysts, including, if memory serves, Mary Meeker and Henry Blodget, resulting in the "settlement" which created a few so-called independent research houses. And required then-existing investment banks to buy some research from these allegedly independent research sources, thus supposedly ending biased research, which was, in reality, marketing by another name, in their own departments.

But if the Martin Act, thanks to Spitzer, and, according to the Observer, Dinallo, had been effectively used in the early 2000s, why did we have the recent mortgage-securities financial meltdown?

What was the point of all that Martin Act-driven investment banking and research restructuring?

Nada.

Now we have Andy Cuomo going after John Thain, Ken Lewis, and AIG, all over bonus payments. The theory being, I guess, that companies which took federal money, either at the request of the feds, or as part of a shotgun-bailout, as at AIG, should not comply with pre-existing contractual obligations to pay promised bonuses.

What exactly does Cuomo do for anyone by tilting at windmills like the already-purchased Merrill Lynch, or the federal government-owned AIG?

Aside from keeping his own name in the headlines, and bullying CEOs, I doubt Cuomo's antics materially improve anything about financial markets.

As I noted earlier in this post, Spitzer's sound and fury directed at the research practices of brokerages and investment banks almost a decade ago did nothing to prevent the structured-financial instrument-sourced problems we face today.

Other than lending the current New York AG a bully pulpit with which to make his name recognizable nationally, I don't think the Martin Act does anything relevant nor material. In fact, if anything, its enabling the AG to drag anyone in for questioning, without promise of charges to be filed, pretty much makes it a poster child for the worst in legislative excess and untrammeled exercise of government power in a truly horrific and improper manner.