The Importance of Being Eliot

Wall Street - and some of Asia's markets as well - should really panic if New York's voters give Eliot Spitzer (again) to troll through corporate records looking for wrongdoing - and if the name Jesse M. Unruh rings a bell.

Spitzer, the disgraced former New York governor and attorney general best remembered for his forced resignation five years ago after being revealed as "client #9" in the wake of a prostitution scandal, announced last week his return to the political spotlight by running for office - as the New York City Comptroller.

One would be forgiven for thinking the Harvard-trained lawyer - once considered in some quarters to be on his way to the White House - has gone low and cheap to run for a backwater auditing office best associated with pallid career politicians. But no, Spitzer the corporate scourge has other ideas.

The New York Comptroller's office acts on behalf of the city by overseeing its five public-employee pension funds with US$140 billion in assets and dealing with bond issuances. This unique role of being administrator, auditor and fiscal manager would give Spitzer, who earned a reputation as the "Sheriff of Wall Street", the license to patrol the financial hub once again like a baton-swinging New York cop, only much more powerful, since the comptroller manages the city's relationship with Wall Street and the capital markets.

With the size and financial heft of New York, Spitzer saw how the comptroller exercising control of those pension funds, thus acting as institutional investors in many cases, would allow him to exert his sway over corporate America, as he did in his previous political life, acting "above the law" as some bitterly remembered.

"I want to do to the comptroller's office what I think we did to the attorney general's office in terms of re-energizing, revitalizing, re-imaging," said Spitzer in one of his many TV interviews the past week. "I think there is an enormous opportunity to do that with the comptroller's office."

The comptroller allows him to "reconfigure" Wall Street "as institutional investor in the capital market", Spitzer said in a CNBC Squawk Box interview about his campaign to seek "redemption" and ask the public to look at his track record as a reformer, to consider the "totality" of his career after he has "erred" in his personal life. It should be pointed out Spitzer has a widespread reputation as egotistical, unpleasant and monomaniacal. Nonetheless, he says, and is probably right in doing it, that "I was one of the more prescient voices recognizing financial system flaws."

Spitzer said he jumped into the race just days before the official petitioning deadline last Thursday. He may have taken cues from Jesse M. Unruh, a US Democratic politician now remembered as the California state treasurer, a position he held till his death in 1987. In his obituary, the Wall Street Journal championed Unruh for becoming "the most politically powerful public finance officer outside the US Treasury" and the New York Times said he took "an obscure post whose duties had long emphasized bookkeeping. In characteristic fashion, he soon transformed the job into a source of financial and political power that reached from California to Wall Street."

Unruh is also best remembered as Speaker of the California Assembly, a position he revolutionized for both good and bad. He earned the name "Big Daddy" for his ruthless disciplining of lawmakers who crossed him while at the same time building research and other staff and establishing transparency rules in the passage of laws that won the legislature recognition as the best in the nation. After losing the race for California governor against Ronald Reagan in 1970, he retired from politics, only to return in 1974 to run for the job of state treasurer, a position previously filled by time-servers.

How eerily familiar on most counts.

The second coming of Spitzer with his idea of an expanded purview as comptroller would also result in a re-examination of all policies and corporate governance matters tied to Wall Street. That should be a welcome sign to the global world of finance and Asia in particular. The investing public in financial capitals like Hong Kong and Singapore has been slapped by headline-hitting listing scandals in recent years, many originating from mainland China.

The local regulators have consequently introduced new regulations to promote best practices - for example, criminal and civil liabilities were announced in Hong Kong last December to promote more extensive due diligence of listing candidates.

The investing public in North America would also welcome tighter regulations following headlines of scandals involving Chinese companies like Sino Forest - other Chinese companies would also appreciate not being given blanket treatment simply because of their origins.

By last Thursday, Spitzer had collected 27,000 signatures in fewer than 100 hours, far above the 3,750 to qualify, and a couple of months to convince New Yorkers to vote for him on September 10.

He has his share of enemies - former AIG chief Maurice "Hank" Greenberg sued Spitzer for defamation last Friday - not to mention the need to regain public trust, but with Spitzer on the horizon, you bet Wall Street will be on its toes again.

(Vanson Soo runs an independent business intelligence and commercial investigations practice specialized in the Greater China region. Blog: http://vansonsoo.com)