Corrupt Wall Street Analysts

We're told that when Joshua blew his horn, the walls of Jericho came tumbling down.

Well, thanks to some whistle blowers, a lot of people's trust in the integrity of Wall Street has recently come tumbling down. At issue is the role of stock analysts who work for such investment giants as Citigroup, Merrill Lynch and Morgan Stanley Dean Witter. These analysts are experts who are supposed to give honest advice to investors about the value of particular stocks. The befuddled mass of investors don't have the time or the tools to study companies and trends in order to make an informed decision about whether to buy, sell, or hold a company's stock. For this, most trust the advice of Wall Street stock analysts.

But it's time to analyze the analysts, for many have been giving awful and possibly dishonest advice, leading millions of unsuspecting investors astray. For example, these are the so-called experts who absolutely gushed about the endlessly bright future of stock prices throughout the past decade, pumping up the market and especially serving as cheerleaders for high-tech stocks. Last December, when tech stocks were tanking (having already plummeted 60 percent in value) 71 percent of Wall Street analysts were still cheerleading, giddily telling investors to buy, buy, buy.

More than exuberance was at work here -- conflict-of-interest has crept into play in these big firms, thanks to the new law allowing banks to merge with stock brokerages. Now the banking division of, say, Citigroup, which needs corporate clients for its merger business, can squeeze the once-independant analysts in the group's stock brokerage division to put out a favorable report on a new client's stock. Indeed, in these conglomerated institutions, the bankers can promise a favorable stock rating to a corporation they're trying to attract, and a stock analyst's pay can even be tied to helping attract corporate clients for the bank.

This is Jim Hightower saying ... Wall Street has never been a safe place to play, but now your investments could be skewed by rank dishonesty.


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