-->WEEKLY COMMENTARY

June 7, 2004

Thank You, Mr. Spitzer

By Theodore Butler

Last week, I wrote about the surprise announcement that AIG was relinquishing its market making role in silver (and gold) on the London Bullion Merchant Association. The news had been literally out for only hours when I wrote about it. I was quick to label it as being profoundly important for the silver market. I still believe that is the case. I've reflected on this development for a week now, and would like to expand on it.

The responsibility for this remarkable sea change in the silver market can perhaps be traced to one man - Eliot Spitzer. Sure, it took the efforts of many of us to raise and frame the issue in the first place, but it’s my guess that without the presence and stature of Attorney General Spitzer, I'm afraid we would be howling at the moon. Without Spitzer taking a look, it would be business as usual for the wolf pack.

I know that many of you had come to doubt that Mr. Spitzer would intervene on our behalf, given what seemed an interminable passage of time for a crime in progress. I understood this, and although I maintained strong public faith in the man, I confess to my own occasional private moments of doubt. Especially considering how manhandled the silver market has continued to be by the dealer wolf pack.

But the one thing that caused me to maintain my faith in Spitzer was by asking myself the same thing I always ask when I'm trying to anticipate how someone else will react, namely, if I were in his place, what would I do? This is a rule I try to live by, that I think is too often neglected. It's easy to criticize, particularly public officials for the problems of our day. But if you make the conscious effort to try and place yourself in their shoes, in the here and now, and project what you would do, if you were them, it gives you pause for thought. None of this - I wouldn't have gone into Iraq in the first place, or I never would have let the debt become so large - it would be easy if we could undo things. I'm talking about what we would each do now, in the other guy's shoes, with current conditions. As I've written previously, it's a pet peeve of mine to criticize without offering a solution.

In the case of Spitzer, I asked myself often, what would I do in his place? Not what I would do to these silver crooks (which would be too extreme to even write about), but what would I do if I were him, the NY Attorney General? The very first thing I would do, if I were him, would be to deal with it as privately as possible. There was absolutely no need for him to keep us all apprised on what he was doing. Let's face it - if the silver market is manipulated as I believe and allege, this is a very big problem. Some of the biggest firms in the financial world appear to be involved. Considering the possible ramifications to the financial system, if you are the AG, you don't go in with guns blazing. You try to fix the problem with as little collateral damage as possible.

In one of Eliot Spitzer's first Wall Street encounters, he extracted a $100 million settlement from Merrill Lynch, in the research analyst scandal, which led to the billion+ dollar settlement with other firms. He was criticized for letting them off too gently. He admitted he probably could have criminally indicted Merrill, but was worried about the potential impact on the system and society. Would it serve the greater good to destroy Merrill Lynch, or other large financial firms, as opposed to punishing them and making sure the bad behavior doesn't recur? These are the things you must consider, if you are in his shoes.

People can believe whatever they want to, including that Eliot Spitzer isn't responsible for AIG pulling in its horns in silver. But as the guy who raised the name AIG in the first place, there is no doubt in my mind as to Spitzer's role. And if the remaining Silver Managers in the wolf pack think it will be business as usual for them with AIG's reduced role, they will be underestimating what I think is Spitzer's determination and sense of right and wrong….