By Maxine Shapiro, KERA 90.1 business commentator
Dallas, TX – Boy, chalk one up for Wall Street. The blindfolded woman has spoken, and Merrill Lynch is off the hook. I'm Maxine Shapiro with KERA Marketplace Midday.
In a pretty stunning move, a Federal District Court Judge in Manhattan dismissed two class-action lawsuits against Merrill Lynch and analyst Henry Blodget. Both were accused of allegedly producing tainted analyst research to keep the banking ties intact with the companies they were analyzing. 96-year old Judge Milton Pollack, who has had more than 40 years experience in securities law, called the plaintiffs "high-risk speculators."
There is a big difference between an investor and speculator. An investor is someone who buys a stock and sits with it for a period of time - months or years. Speculators, who dominated the market in the 90's - especially during the dot.com bubble - get in and out of the market hourly, and sometimes quicker. See, the two Internet companies that were named in the suit experienced a 98% drop in their stock price while Blodget was still touting it as a buy. Back in April, Blodget was even banned from the securities industry for doing exactly what these plaintiffs alleged he did.
But Judge Pollack was not moved by any previous evidence. Even the e-mails which New York State Attorney General Elliot Spitzer produced demonstrating how the analysts, though disparaging a company privately, publicly called the stock a good buy.
And in some pretty harsh wording, Pollack scolded the plaintiffs for even thinking the federal securities laws were meant to, "underwrite, subsidize and encourage their rash speculation in joining a freewheeling casino that lured thousands obsessed with the fantasy of Olympian riches." He's got a point?! See, none of the plaintiffs were Merrill Lynch customers - and they failed to show how Merrill was responsible for their losses. As of yesterday, 25 more class-action lawsuits are waiting to be heard by Pollack - all concerning Merrill and the Internet stocks. It's a guarantee: "if you lost money, contact our attorney" ads will be pulled. For KERA Marketplace Midday, I'm Maxine Shapiro.
Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m.
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