Students and professors at SUNY New Paltz flocked to hear the now infamous former Gov. Eliot Spitzer speak about New York’s financial meltdown on March 11.
More than 350 students and faculty members attended the event, eager to catch a glimpse of the ex-governor who made headlines after a prostitution scandal in 2008. After an introduction by the college’s President Steven Poskanzer, Spitzer explained that both he and Poskanzer were undergraduate classmates at Princeton University and joked about the scandal which resulted in his resignation from office.
“We have a vow of silence,” Spitzer said about his longtime friendship with Poskanzer. “Neither of us will acknowledge the sins of the other, although I suppose mine are generally well-known.”
Sponsored by the Student Organization of Business, Ethics and Research (SOBER), Spitzer’s hour-long speech covered topics such as the integrity of businesses, unconscionable acts made by highly paid executives, the carelessness of federal legislators and the mistakes made on Wall Street that led to the overall collapse of the economy.
Spitzer warned students to “be wary of those who think they are powerful” and advised that if banking suddenly becomes exciting, “bad things are going to happen.”
“Banking should be boring,” he said. “There’s a reason we used to have this image of bankers in gray suits plodding along, carrying a briefcase, not smiling.”
Relating to state and federal regulators that helped lead to Wall Street’s demise, including Secretary of Treasury Paul Geithner, Spitzer said bankers and legislators were the definition of the “Peter Principle on steroids.”
“People got promoted to the point of incompetence,” Spitzer said. “We are now giving those very people that failed the power, so the next time they fail, it will be worse.”
He said the enticement of making risky bets knowing that taxpayers would be there to catch the banks when they fall, needed to be stopped.
“That asymmetry between risk and reward will get anybody to a point where they will make bets that don’t make sense. It’s that old heads you win, tails you lose… that was our business model.”
During his speech, Spitzer compared Goldman Sachs’ $12.9 billion taxpayer profit last year against the $8 billion funding for a new high speed rail, saying that the current financial debacle is a serious problem and misallocation of proper funding.
“We haven’t fundamentally maintained the existing structure that got us to where we are,” Spitzer said. “This isn’t a question of lack of power … this is a question of lack of will to use the power they already have.”
A former New York attorney general, Spitzer related the current financial catastrophe to a case he once prosecuted against banking executives who admitted they were dishonest and unlawful, saying, “we are not as bad as our competitors.”
Spitzer said the bankers thought if they acted with integrity, they would lose market share and lose profits, therefore acting adversely seemed a better strategy.
“They said [to competitors], ‘If you’re dishonest, we will be worse,’” he said.
The former governor suggested that a shareholder revolution would help fix the financial problems and lead to a stable economy. According to Spitzer, until shareholders exercise their power, none of this will matter.
“The imperative of the marketplace is to get market share and generate profits,” he said. “Only government can establish rules of integrity for the marketplace and enforce them.”
Slideshow by Kerri Dornicik