The_Talking_Cure[1] - October 1, 2004 | home THE FINANCIAL...

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October 1, 2004 | home THE FINANCIAL PAGE THE TALKING CURE by James Surowiecki Issue of 2002-12-09 Posted 2002-12-02 When you think of Wall Street, candor is probably not the first word that leaps to mind, but in the past few months the Street has been gripped by it. Merrill Lynch now warns, on the first page of each of its research reports, that it may be seeking "investment banking or other business relationships from the companies covered in this report." (That is to say, the analysis may be tainted.) The New York Stock Exchange, meanwhile, has proposed a rule that would bar a stock-market analyst from talking to newspapers that fail to disclose the analyst's conflicts of interest. Even the C.E.O. of Goldman Sachs, one of Wall Street's most discreet firms, has chimed in with a public nostra culpa on behalf of the industry, and has exhorted his peers to restore "trust in our system." This outbreak of straight talk is Wall Street's way of addressing the collapse of its credibility. Everyone agrees that conflicts of interest riddle the securities and accounting industries—research analysts touting dubious companies to win their business, auditors signing off on dubious numbers to keep it—and that something must be done, so Wall Street has decided to adopt the talking cure. The problem with the conflicts of interest, the argument goes, is that no one knows about them. Fess up, and the problem goes away. It's a nice thought, but the diagnosis is facile, and the remedy won't work. Start with
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This note was uploaded on 09/07/2011 for the course BUS 682 taught by Professor Staff during the Spring '11 term at S.F. State.

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The_Talking_Cure[1] - October 1, 2004 | home THE FINANCIAL...

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