Note to Wall Street: Nix the Schadenfreude

There is an unseemly amount of gloating on Wall Street in the wake of the stunning disclosure yesterday that New York Governor Eliot Spitzer was a client of a major prostitution ring. Disgust is called for. Delight is not.

What he did as Attorney General to clean up abuses and improprieties in the mutual fund and investment industries, to name just two areas, was long overdue and entirely justified. The ordinary shareholder, who tends to view Wall Street as a playing field that is too often tilted toward the big teams, is better off as a result. Can anyone, with the possible exception of its former CEO Dick Grasso and one-time board member Ken Langone, seriously suggest that the governance of the New York Stock Exchange was not improved by the reforms in which Eliot Spitzer played a leading role?

Clearly, there is a temptation to rewrite history. Whatever Governor Spitzer has done in his personal life should not be taken as a vindication by companies and individuals of the wrongdoing and shortcomings he exposed as Attorney General. One wonders if Wall Street senses in this scandal the feeling that some of the ethical pressure will dissipate and allow it to get back to business as usual.

Spitzer’s actions, on a personal basis, were shameful and almost too bizarre to believe. But we have seen before how bright lawyers from Harvard and Yale have done inexplicably stupid things. Many it seems begin to believe their own press clippings and the flashy magazine profiles about their apparently superhuman qualities. President Bill Clinton’s reckless affair with a White House intern, and his lying about it to the world, ranks high in that category. And a British lord, also considered brilliant by all accounts and trained in the law as well, is currently sitting in a U.S. prison in Florida because he thought he was above the law.

The governor’s resignation is but days, if not hours, away. The sooner the better. The title governor and the description “client – 9” are incompatible, to put it mildly. And he may well face criminal charges. But Wall Street faces a crisis itself. And questions are being raised about the multi-billion dollar judgments of some of its top players. Now is not the time to rejoice in the personal failing of someone who at least had the courage to make sure the rules were being followed at a time when Wall Street itself was not exactly behaving as a paragon of virtue.