Wall Street's toughest cop award would undoubtedly go to Eliot Spitzer. But in the aftermath of the scandals that the New York Attorney General unveiled, other regulators are taking an aggressive approach to cracking down on crime on Wall Street.
Newsweek says it has learned that while Spitzer's office and the Securities and Exchange Commission are both working on the AIG-General Re case, the two regulators have taken markedly different approaches to their investigations.
Spitzer considers Warren Buffett, the legendary investor, a witness in his probe, which is focusing on AIG and its former CEO Maurice "Hank" Greenberg. But SEC officials are examining whether Buffett or others at his company had any advance knowledge that the AIG transaction was being used improperly, according to people close to the matter.
"The question is what did Buffett know about the deal," said one SEC official. "Spitzer can do his own thing, but he doesn't control what other law-enforcement agencies do. At the end of the day, he doesn't control what we do."
The "Spitzer Effect," as it is being referred to on Wall Street, has served as a wake-up call to many other agencies. For instance, the Federal Reserve, which mainly implements monetary policy, forbid Citigroup from doing any big deals until the financial giant's internal compliance problems were fixed.
Lawyers on Wall Street seem impressed with the SEC's stepped-up efforts to not just punish blatant perpetrators but also fish out "appearance problems."