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American Morning

Wall Street Comes Under Scrutiny

Aired April 26, 2002 - 09:33   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, CNN ANCHOR: We promised you a story about gold, and we are going to do it Monday. We have some other issues of -- perhaps a little more important to address, but we are going to talk about rising gold prices first of next week. Meantime, Wall Street's biggest big brother is stepping into the investigation of analysts at top brokerage firms, and you might say it's about time.

For the latest on the story, we are joined by Andy Serwer, "Fortune" magazine editor-at-large. Took a little old state attorney general to wake up the SEC, didn't it?

ANDY SERWER, EDITOR AT LARGE, "FORTUNE": Yes. It is like bees coming in onto Wall Street, right Jack?

CAFFERTY: I guess you could.

SERWER: Listen, they are in deep soup down there, and I really think that you can say Wall Street is in more trouble than it has ever been since going back to 1920s and 1930s when the federal government had to create all those rules and the Securities and Exchange to oversee these guys. You know, we have got the SEC and taking over -- or, at least, working with the state attorney general. They are going to be looking into Merrill Lynch. We already know Eliot Spitzer has been doing that. There's Merrill Lynch headquarters right there. They are also going to be going after Solomon Smith Barney, which is owned by Citigroup and...

CAFFERTY: What do they suspect them of doing, just in a nutshell?

SERWER: Right. Exactly. What they suspect them of doing is the analysts are basically compromising their ratings of companies to get investment banking business. And this is very different from the 1980s with the junk bond scandal. This really goes to the very core of what Wall Street does, they are going after the big firms, not just Ivan Boski (ph) and some peripheral figures. They are going after Merrill Lynch, Goldman Sachs, Morgan Stanley, Credit Suisse, First Boston, and Citibank.

CAFFERTY: And some point, inquiring minds might want to know that if Eliot Spitzer, the attorney general of the state of New York can figure this stuff, out where was the hell was the SEC whose charter says this is what you are supposed to be doing. SERWER: Right. The SEC definitely did not go after this, and it is ironic because some people thought that Harvey Pitt wasn't going to be a strong enforcer, but he really is being forced into doing this. Eliot Spitzer is taking the lead and Harvey Pitt is following him.

CAFFERTY: Now, the other story I wanted to get to. This is not a vocational trade school. The University of Pennsylvania -- I mean, we're talking Ivy League.

SERWER: Well, let's just stand up. Let's just stand up.

CAFFERTY: Well -- all right.

SERWER: Let's stand up, because this a story -- this is a story that gets to the very heart of a man's ability to earn a living. Now look at this. The University of Pennsylvania has come out with a study that says the taller the man is -- this is something I have always suspected -- the more money he makes, OK? A study of 2,000 men -- it shows...

CAFFERTY: I have got about $40 on you.

SERWER: They're saying that for every inch of height, you get paid 1.8 percent more, OK? To me, I just got...

CAFFERTY: How tall are you?

SERWER: Well, I'm kind of tall. I'm...

CAFFERTY: No, you are not. You are not kind of tall. I'm kind of tall. You're kind of medium, and that is giving you the benefit of the doubt.

SERWER: Napoleon, Tom Cruise, Jack Welsh, Andy Serwer. We're tall guys. I'm about 5'7" and 3/4. See how I like to stretch it?

CAFFERTY: Well, I'm 6'2". So that would be what -- I would get -- I should get roughly 10 percent more.

SERWER: And I am sure you do.

(CROSSTALK)

SERWER: I have got to get some elevator shoes.

CAFFERTY: There is no title with my name. You're an editor of a big magazine. Let's sit down.

SERWER: I have got to talk to Monica (ph) -- all right, we'll talk -- Monica, our production assistant the other day just named me the "Little Man," so I am really feeling this. And I really -- Monica, I really think it may be "Little Big Man." That will work.

CAFFERTY: That will work. You know, somebody -- we talked about this earlier. You know, we're not making light of it. Except it is kind of silly. Who decides that they are going to study the relationship between income and physical height?

SERWER: Ivy League school.

CAFFERTY: Men, women, yes. Various levels of education, yes. Other sociological or cultural differences, yes, but just physical height?

SERWER: They say that short guys are stigmatized, that we have power issues.

CAFFERTY: Remember that record that came out a few years ago that was so very popular?

SERWER: Randy Newman, "Short People." I hated that record. You know, for some reason...

CAFFERTY: I thought it was a great record.

SERWER: You liked that?

CAFFERTY: It was a great record, Andy. Terrific record, Andy.

SERWER: I never liked it. All right.

CAFFERTY: Talk to you later.

SERWER: All right. See you.

CAFFERTY: And we will do the gold story Monday.

SERWER: We will, because that is important stuff.

CAFFERTY: Paula.

PAULA ZAHN, CNN ANCHOR: Nevertheless, Andy, you are a giant in my book.

SERWER: A giant amongst business reporters, that kind of thing. Thank you, Paula. All right. Thank you, that makes my weekend.

ZAHN: Absolutely. That kind of stature. No doubt about it. Thanks, you two.

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