Frank Quattrone: Tear Down That Wall

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Question: If Frank Quattrone didn't exist, would Eliot Spitzer have engaged in that mysterious dangerous conduct with high-class hooker Ashley Dupre? Andrew Ross Sorkin never gets around to asking that obviously pressing question in his otherwise sensible column discussing the recent statements by Quattrone advocating the repeal of the Spitzer initiatives that built up a wall between analyst research and investment banking on Wall Street.
You'll recall that in the last round of Wall Street scandals Wall Street analysts were accused of providing misleadingly positive research of companies that were investment banking clients of their firms. People got barred from the business, Wall Street firms ponied up millions in fines, and the banks agree that analysts would not be paid from revenue derived from investment banking.
This is said to have triggered a flight from sell-side research, both by individuals going to hedge funds and by firms that have exited the business entirely. Simply put, sell-side research doesn't pay the way it used to.
"Mr. Quattrone is right that the pendulum has probably swung too far, and in the cool light of day, it might be time to lift some of the restrictions," Sorkin writes in his column today. "Analysts should be allowed to talk to their own investment bankers on occasion."
Over at Portfolio, they've already taken a shot at this point of view. Megan Barnett described Quattrone as "dead wrong." Today Felix Salmon thinks Quattrone's problem is that he "still doesn't grok that analysts are meant to work for investors, not investment bankers." In short, sure we'd have more IPOs if sell-side research got on the investment banking gravy train again but why on earth would we want to go back to the disaster of the tech boom?
"Quattrone wants his free lunch back?" Salmon writes. "Well, he's not going to get it. No matter how much he kvetches to Andrew Ross Sorkin."
Analyzing Wall Street's Research [New York Times]

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