The Crusader

Eliot Spitzer—the man whom Fortune once deemed the "Enforcer" of Wall Street, whom Time once likened to Moses, who was recently slammed by the conservative National Review as "the most destructive politician in America"—is at last alone. It's dusk on a July Sunday at New York's LaGuardia, the most deflating hour at any airport, but most particularly this one, where young management consultants, who moved to the city in anticipation of actually working in it, wait for their flights to Detroit and Atlanta, lifted in spirit only by the promise of a return the following Thursday. It's the time when vacationers, who've had their fill of getting jostled on the 4 or the 5 or the F, are readying reports for their neighbors back home about seeing The Lion King and walking through the NBC Experience store, and looking forward to the prospect of a drive home in the Ford Explorer and maybe some TiVoed American Idol before bed.

Yet Spitzer, the attorney general of New York since 1999 and perhaps its next governor, goes unnoticed. Perhaps for one of the last times in his adult life he is with them, really with them—in jeans and a union lawyers for kerry T-shirt, his legs crossed and a duffel bag at his side. Reading a book called America and the World, which was sent to him by the Council on Foreign Relations, he occasionally looks up at the planes on the runway, and then to his left, where no one sits, and to his right, where a tanned young man paces in anticipation of a trip home.

A few minutes later, when Spitzer catches sight of me boarding the same flight he's taking, to Buffalo, he stands and, with boarding pass in hand, says, "There's something about flying out on a Sunday night that makes you realize the work week is ready to start."

Whether he consciously set out to do so or not, Spitzer has spent hundreds of the preceding work weeks transforming himself from a relatively obscure elected state official into one of the most loved and hated—and certainly feared—men in America. In February, a month before the Super Tuesday primaries, Spitzer found himself called upon by John Kerry to endorse him in, of all places, New Mexico. Spitzer's rise to national prominence has empowered and given voice to scores of fellow state politicians, reinvigorating the great battle between local and federal power that has been an ineluctable element of American politics since Hamilton and Jefferson.

Make no mistake: Spitzer is the Democratic Party's future. Or, at the very least, a significant part of it. Yes, there's the presidential nominee, who at the time of this writing registered with American voters as either "the other guy" or the one who didn't use faulty information to settle an old score and send U.S. troops into war. But, along with Michigan's governor, Jennifer Granholm, and the soon-to-be Illinois senator Barack Obama, Spitzer represents the cutting-edge model of the post-Clinton Democrat, drawn from a generation of politicians whose formative experience wasn't the civil-rights movement, who are tough on crime, and whose foreign policy isn't shaped by Vietnam.

"He's an extraordinary candidate," says the Democratic National Committeeman Robert Zimmerman, talking about Spitzer's prospects not only for the governorship but also, one imagines, for still higher office. "He's not received in a partisan light. He gets standing ovations in the heart of Republican suburbs and New York City. It's the same response. He has a national constituency and a national message. He's very significant to the Democratic Party, to what we believe in as a country and, quite frankly, what we believe in as Democrats."

Of course, Spitzer hasn't actually declared that he's running for anything. But when—not if—he enters the 2006 gubernatorial race, Spitzer will most likely be faced with what the columnist Mike Royko, remarking on the death of Chicago's Mayor Richard J. Daley, called "the ingredients for the best political donnybrook we've had in fifty years." That's because looming for Spitzer is not only the possibility of facing the former New York City mayor Rudolph Giuliani in the general election (since the current governor, George Pataki, will in all likelihood step down) but also the very real threat of a knockdown primary race with Senator Charles Schumer, who, according to sources within the party, is itching to leave his Washington post for the mansion in Albany. A Schumer-Spitzer primary would be juicy enough, but the prospect of a Giuliani-Spitzer general election is delicious to tabloids in New York, where gossip holds that the two men loathe each other (Spitzer, for his part, denies this).

It's likely that the ultra-competitive Spitzer looks forward to such donnybrooks with relish. "If Eliot decides to run for governor, it won't matter who else is in the race," says Darren Dopp, Spitzer's spokesman, abandoning the conditional in his enthusiasm. "He will use all of his energy and resources to win."

It is 7:00 a.m. on the morning after our flight from LaGuardia when Spitzer (a tall, balding man, forty-five years old, whom three different women with no affiliation to him have recently told me they see as virile and somehow, um, sexy), already awake for two hours, begins his drive from Buffalo's Hyatt Regency to the Chautauqua Institution, in western New York. The institution was founded in 1874 as a gathering place for interdenominational meetings and discussions on religion, science, and the arts: over time it has also become a nine-week summer community for the well-off from northwestern New York and parts of Ohio and Pennsylvania. Speakers at the institution have included Booker T. Washington, Susan B. Anthony, and Arkansas Governor Bill Clinton.

Along the way there's a ten-minute meeting at a bed-and-breakfast with an upstate county executive running for Congress, and a drive past towns such as Westfield, with its statue of Abraham Lincoln thanking Grace Bedell, a little girl who wrote the newly elected President to suggest he'd look cute with a beard, and Mayville, the Chautauqua County seat; the original clerk's office, near where Mayville's two-room courthouse stood, is now Mel's Full-Service Bakery and Café.

"There's almost a midwestern sensibility here," Spitzer says. "You're both geographically and sensibility-wise closer to the Midwest than you are New York City." He pauses for a moment, as if he's just remembered the post he will soon run for, and adds, evidently not wanting to offend future constituents, "But it also feels like upstate New York."

He should know these roads; traveling them made him the Democratic future. In 1994, after working for six years in the Manhattan district attorney's office and a stint in private practice, he took a run at the attorney general's office. He had no previous political experience, and finished last among four in the party's primary. For the next four years he canvassed and crisscrossed the state in his Dodge minivan, showing up in the driveways of local Democratic Party officials, attending every fundraising dinner he could. (A few days before our trip, standing in his office, he pointed to a map of the state that hangs on his wall, explaining that it had been given to him during his successful 1998 campaign. "I said, 'If we win, we'll put this on the wall.' As a demonstration of my parochialism, I actually think looking at a map of New York is kind of neat. You can see the Finger Lakes. I've been to basically every town on that map.")

"Quite literally, he wore out his shoes," Spitzer's wife, Silda, told me recently over breakfast on the Upper East Side. "He has one pair of dress shoes. I find it quite amusing to read the number of articles that speak about Eliot's privileged background. His family is very comfortable now but everything they have has come by hard work and using a fierce intelligence. It really is that American dream that he comes from, and no one in his family takes it for granted. He lives simply and in a very spare way."

"If I'm going to Kmart or Wal-Mart or somewhere similar," she continues, "Eliot looks at the bills." (According to IRS filings, last year Spitzer earned $755,000—the majority of which, $596,000, came from rent on two buildings he and his family own on Madison Avenue.)

In some ways Spitzer's is a familiar New York City story: His father, Bernard, who was born to immigrants from Austria and who grew up on the Lower East Side and fell in love one summer in the Catskills with a woman named Anne (whose parents were from what was then Palestine), turned a civil-engineering degree into a multimillion-dollar high-rise-apartment business. Eliot, the youngest of three children, spent his childhood in the relatively upscale Riverdale section of the Bronx. In what has become the first chapter of the Spitzer legend, Eliot's parents turned their household dinners into public-policy forums, Kennedy-family style, where they would force their children to come up with topics for discussion. These could include anything from political races to literature, as long as the children were being compelled to think about the state of the world.

And so Eliot—who got his secondary education at the leafy, near suburban campus of Horace Mann, where he thrived as a tennis player at the same time that John McEnroe was dominating at the school's rival, Trinity, on the Upper West Side—did not go into the world a trivial man. In fact, it might be said he left home, for Princeton, a teenage wonk. (Today he's an adult wonk, with an attention to detail that seems borderline obsessive. Before interviewing with me, Spitzer had his spokesman, Dopp, drop me an e-mail asking, "Would you mind sending me a little personal information?" Nothing elaborate, Dopp wrote, just a "brief sketch" of myself. "Are you from [New York] originally? Where did you go to school? … What does your Dad do? What do you do to stay in shape? Anything you wish to share. Spitzer likes to know.") As a sophomore at Princeton, Spitzer ran for and won the presidency of the undergraduate student government—something that earned him regular mentions in The Daily Princetonian and the scorn of the likes of Virginia Postrel, now a libertarian columnist, who on her Web site deemed her old Princeton classmate Spitzer to be part of a group of "resume-polishing student-council weenies." If true, the résumé he was polishing was hardly typical: that summer, taking only a few dollars and an emergency credit card, Spitzer went to work as a day laborer in Atlanta and New Orleans and upstate New York, spending his days handling fiberglass insulation or picking tomatoes and his nights in one-night boarding houses. Why? Because he understood he'd been given advantages, and wanted to know if he could survive without them.

"He didn't know he was a geek, but he was," says James Cramer, a former hedge-fund manager who currently co-hosts a talk show on CNBC. He and Spitzer both attended Harvard Law School and met their first week there, in 1981. Spitzer may have been a geek, but he was a tireless geek. In Cambridge he worked as an editor at the Harvard Law Review. As a summer intern for Lloyd Constantine, then the assistant attorney general of New York in charge of antitrust enforcement, Spitzer worked on the prosecution of a price-fixing case involving ambulance services in Syracuse. ("I've had hundreds of interns and hundreds of students," Constantine says. "He was the best. He was different from the day he walked in. He had an air of confidence that said he was a leader. He reeked of it. He came in and in a very polite way his message was 'I'm smarter than you, and I can lick you.'") During the school year Spitzer was a research assistant to Alan Dershowitz, and worked on the appeal case of Claus von Bulow, which was later made infamous by the 1990 Jeremy Irons movie Reversal of Fortune.

"One time Dershowitz gave us his Celtics tickets," recalls Cliff Sloan, one of Spitzer's Harvard classmates and now general counsel for the online versions of Newsweek and The Washington Post, "and the Celtics were playing the Knicks [at Boston Garden]. And here we are in the middle of this very pro-Celtics crowd, and Eliot was on his feet cheering for the Knicks. He was angering everyone around us, especially the regulars—but he was unbowed in his full-blown enthusiastic support of the Knicks. Eliot's just fearless."

Perhaps the best thing Spitzer got out of his time at Harvard was Silda, a fellow law-school student, whom he married two days before the stock-market collapse of 1987. She is tall, blonde, and discreetly pretty in the manner of, say, a young Blythe Danner, and comes from an America that to the vast majority of New Yorkers seems as foreign and remote as Mars. The product of small-town North Carolina life, Silda arrived in Cambridge from an all-women's school, Meredith College, in Raleigh. Today she runs, without salary, a foundation she created for city children, and she can speak passionately, with a precision that matches her highly articulate husband's, about everything from parenting to international law. She is, in short, perfect first-lady material, though outwardly reluctant to contemplate that role.

"That's going to be Eliot's decision," she says of a run for governor. "We'll see where that ends up falling out. I think he'd be great. It's not something I'm pushing for anyway."

One could certainly sympathize if Silda were to approach her husband one day and say, "Enough." After all, she was five months pregnant with the couple's third child when Spitzer announced his 1994 campaign. And she was a completely sleep-deprived mother when Spitzer began one of the strangest political campaigns in New York history, four years later. After he emerged the winner, with only 41 percent of the vote, in a three-way Democratic primary, in 1998, the New York Times editorial page half-heartedly (at best) threw its support to him over his Republican opponent, Dennis Vacco. The Times wrote that Spitzer had "misled the public about how his father's wealth was used to support about $9 million in loans that financed his campaigns in 1994 and 1998," adding, "We endorse Mr. Spitzer because Mr. Vacco's performance and his key policy positions make him an even worse choice." Not the most ringing endorsement.

Even from his own party support for Spitzer was only lukewarm. After being prodded into endorsing him on the steps of the New York Public Library, Senator Daniel Patrick Moynihan walked away, according to a source close to Spitzer, murmuring, "Nice kid. He's gonna get killed."

Spitzer didn't get killed. But on election night his lead was so slight that Vacco would not concede; instead he waited forty-one days, through a vicious, tenacious recount. (In the end Spitzer won by 25,000 votes.) Vacco, now in private practice, says of his onetime nemesis, "I think he's done a credible job."

After he won his battle with Vacco, Spitzer didn't wait long to pick another. In 1999 and 2000, his first two years in office, he led coalitions of northeastern states in suits against midwestern utilities whose pollution had drifted into their air. He has continued to attract attention with the battles he's picked. When the Bush Administration's Environmental Protection Agency tried to roll back the standards set by the Clean Air Act, Spitzer led a group of states to halt it. Most recently, when it was revealed that GlaxoSmithKline, maker of the antidepressant Paxil, had hidden studies showing an increased risk of suicidal thoughts in teenagers when they began using the drug, Spitzer sued, saying the company had not used fair disclosure when recommending the drug to doctors.

In answer to those who say Spitzer is interested only in creating a national name for himself, his supporters point to the fights he has picked locally, in New York. He took action against Manhattan's Gristede's grocery store—successfully demanding back pay and more than minimum wage for its deliverymen. He represented eighteen day laborers in a suit against a contractor in Southhampton, and he brokered an agreement with many of New York City's Korean grocers to raise the wages of their largely Mexican work force from around $3.50 an hour to minimum wage. ("He tries to speak Spanish," says Arturo Sarukahn, Mexico's consul general in New York. "He needs practice, but he's not bad. He's articulate enough to make these day laborers, who are mostly undocumented and who are afraid, feel comfortable.")

For his part, Spitzer says he is not some rogue force, picking fights willy-nilly: rather, he is merely following the model of another New York public official, whose portrait is prominent on his office wall. "I don't have Teddy Roosevelt's picture up there because I have any illusions of grandeur," he says. "It's because I believe he's the one that came closest to getting it—that the market needs those boundaries."

"The three areas where we have been most active, quite frankly, are where he was most active," Spitzer continues. "Trust-busting is analogous to what we've done on Wall Street. He was the first one who understood that preserving our environment and passing it on to the next generation was something we should do. And he believed in protecting labor—not because he said we have a right to a particular wage at X dollars an hour, but preserving labor in the sense of holding businesses to a certain minimum threshold, which is why the labor cases are the ones I feel most passionately about."

But the labor cases are not what made Spitzer a nationally known figure. Indeed, had it not been for the dizzying financial boom of the 1990s and the hangover that followed, he might have remained merely a well-meaning and eager bureaucrat, grabbing blurbs in the New York tabloids for busting up an auto-dealership fraud or calling out an Albany bank for not hiring Hispanics. But he happened to arrive in the attorney general's office a year and four months before the collapse of the nasdaq, in whose meteoric rise millions of Americans had envisioned early beach-house retirements. In other words, he was lucky.

Boy, was he: all the elements for a rise to prominence on a wave of defrauded investors' fury were in place. Spitzer had an angry public. He had an SEC, directed by Harvey Pitt, that had held back its investigative dogs despite the damage done by Wall Street shenanigans and the declining stock market. And most important, he had the Martin Act—a seldom used 1921 New York statute that gives the state's attorney general grand powers for dealing with the financial markets, the grandest of which is the ability to charge someone with fraud without having to show fraudulent intent.

Invoking the Martin Act, Spitzer went after Wall Street with the hammer of Thor. In May of 2002 his office announced a $100 million settlement with Merrill Lynch that revealed to the public the guts of a flawed—if not corrupt—stock-ranking system. Spitzer publicized e-mails showing that Merrill Lynch analysts had recommended dot-com stocks—with whose companies Merrill's investment-banking arm was doing business—to investors while privately referring to those same stocks as "dogs" or "junk." By the end of 2002 Spitzer had gotten the ten biggest firms on Wall Street to pony up $900 million in fines and agree to structural changes that require firms to buy independent stock research and disclose it to investors, and that bar analysts from helping investment bankers recruit business with the promise of a good stock rating. By the following year Pitt had resigned from the SEC, and William Donaldson, a former diplomat and a former chief executive of the New York Stock Exchange, had taken his place, promising, among other things, to rein in state regulators like Spitzer.

"A lot of what Eliot did was take aim at something [the bogus stock-ranking system] that everyone in the industry thought was corrupt" but about which most people figured, "What the heck, nobody gets hurt," James Cramer, the CNBC talk-show host, told me. "We all knew it was corrupt, but nobody wanted to pull back the covers and reveal it to be corrupt."

"He didn't take any power away from anyone," Cramer continued. The people and institutions that should have been using their power to prevent stock fraud had already abdicated it. "So Eliot came in. When Ronald Reagan came to power, he wanted to give power back to the states. The states got it. And this"—a rampaging state attorney general—"is what it looks like."

Having wielded his power against one part of the financial-services industry, Spitzer took on another: mutual funds. First his office went after Edward Stern and Canary Capital Partners, alleging that they had been allowed by Bank of America and others to illegally buy mutual-fund shares after the close of the market and profit from selling them the following day. It led the way to a joint settlement with the SEC that forced Janus Capital to refund $100 million to investors adversely affected by the illicit preferential treatment the firm had given to "market-timers"—speculators who frequently trade large sums of money in and out of the fund in an attempt to profit on short-term fluctuations in pricing. It forced Richard Strong to resign from his own fund company for selling shares of the mutual funds he oversaw while encouraging his investors to hold on to them. And although the SEC forced Alliance Capital to pay $250 million in restitution for its own market-timing abuses (though Alliance acknowledged no wrongdoing), Spitzer made a separate case that the firm's fees were too high (so high, he said, that the firm was "[enriching itself] at the expense of investors"), and—using his own powers under the Martin Act—compelled the company to reduce them by 20 percent. As a result other fund companies fell in line, slashing their fees before Spitzer's office slashed at them.

Spitzer's strategy for correcting criminal behavior has been unorthodox. In the 1980s, when Rudy Giuliani made a name for himself as a federal prosecutor, he did it by not only landing mob convictions but also arresting and handcuffing high-flying financiers in front of rolling TV cameras. But—aside from a couple of exceptions in the mutual-fund cases—Spitzer got no convictions. There were no trials, no scenes of Spitzer or one of his deputies on Court TV, no tabloid-published courtroom sketches of his defendants inside a federal courthouse. There were only fines and, many have argued, Ike Turneresque promises by the firms that they would change their behavior forever.

"I always felt that if he felt the firms had actually broken the law in terms of investor research, he should have prosecuted them either as individuals or as firms," the Wall Street Journal editorial-page editor Paul Gigot, who has occasionally excoriated Spitzer in his columns, told me. "Let a jury decide. I always thought it was strange that he stopped short of prosecution in actual instances. He got the maximum amount of publicity out of … settling for some kind of agreement that is less than revolutionary or remarkable." In other words, Gigot said, Spitzer got prosecution-level publicity without actually having to prosecute. "I would argue the Enron prosecutions are going to have a greater impact on corporate behavior than any of the Eliot Spitzer settlements, because you have the lesson of people going to jail. In stock-market research, nobody's going to jail."

Spitzer has heard this argument before. And on a summer day in his twenty-fifth-floor downtown-Manhattan office, from which, nearly three years earlier, he had watched a plane slice through the second of the Twin Towers, he attempted to explain to me what he was really after in these financial cases: reforming the internal architecture of Wall Street.

Achieving structural reform was more important than punishing any one analyst, he told me, "even a Jack Grubman"—referring to the former Salomon Smith Barney stock analyst whose career ended with a $15 million fine and a lifetime ban from working with securities but no indictment. "Structural reform is much more important than putting people away in cuffs," Spitzer continued. "I'm not going to be the guy who prosecutes the twenty-eight-year-old analyst who's writing these junk reports because he's been pressured to do so, and is in a system that gives him every incentive to do that. His defense would be that everybody knew this was the game. When it came to the individual analyst, it seemed unfair to make him or her the scapegoat for that system."

Critics on the right assert that Spitzer's attempts at regulation have impeded the operation of the free market in a way that's damaging to the public interest. In response, Spitzer invokes Teddy Roosevelt. "Roosevelt was one of the few—if not the only—voices who looked at an economic structure that was increasingly dominated by trusts and power brokers who were saying, 'This is the market; this is what generates wealth.' And Roosevelt said, 'No, that's not the proper way the market should work, and we need antitrust laws. We need competition.' That's exactly what we're trying to do."

Continuing to speak about his libertarian critics Spitzer says, "They reflexively evoke the words 'free market' without an understanding of what the term means. I believe in the market as much as anybody, but I believe I understand it better than they do. I understand that a market needs to have rules by which it lives. If you have a marketplace unbridled by rules that mandate integrity and transparency, then the market will not work." Indeed, his efforts at imposing regulation on Wall Street derive from a "very deep-seated belief on my part that competition does work," he says. "That's what the marketplace is all about." And if the agencies of the federal government—the SEC, the FDA, the FCC, whatever—abdicate their authority to protect that marketplace, Spitzer says, "I view it as my responsibility to twenty million New Yorkers who are investors, who work in the marketplace," to assume it.

Spitzer is well aware of what he has helped create: a system of one-upmanship in which the state and federal governments try to outdo each other, both hoping to seize headlines and regulatory jurisdiction first. Indeed, on July 1, when The Wall Street Journal reported on the SEC's new proactive "wildcatting" program of looking out for scams without hard proof of wrongdoing, it explained that the program was created "after New York Attorney General Eliot Spitzer exposed a number of abusive anti-investor practices in the securities markets, upstaging the SEC."

"Look," Spitzer says, "the way I view the discomfort of those moments is that it's well worth having awakened the SEC, so that it is now doing what it should have been doing all along." He concedes that his actions may also have encouraged other state attorneys general to overstep their bounds. "We haven't quite figured out—and we may need to figure out—how to deal with the few state actors who've become more disruptive than is appropriate. That's going to be a real problem."

To hear Spitzer speak about his job, about what it has become, about what he's made it, is like sitting down with Bruce Wayne, Batman's alter ego, and asking him why he dresses like a bat and lurks in the corners of Gotham each night. He didn't want these cases, Spitzer says—really. But there was a void that needed to be addressed. The process that began when President Ronald Reagan dissolved federal constraints and regulations that had been in place since Franklin Roosevelt's time—a process that has continued through the Administration of George W. Bush—had created a power vacuum that no states-rights advocate thought would ever be filled. If Joe Chill's bullet gave birth to the Dark Knight, Reagan's "new federalism" gave birth to Eliot Spitzer. What was once the prerogative of the federal government is now the prerogative of the states—or so Spitzer sees it.

He sometimes wonders, however, where the right balance between state and federal government lies; he was, after all, opposed to Reagan's ostensible aim of returning power to the states from the federal government. "In law school I was opposed to the Reagan Revolution, which was premised on a devolution of power to the states," he says. "I had this vision, this very classic New Deal vision, of federal agencies in Washington doing their job." Which is not to say, Spitzer acknowledges, that Reagan didn't correctly perceive an underlying truth: federal regulatory agencies had become enormously cumbersome and overly bureaucratic.

Spitzer is at pains to make clear that he is not trying to usurp federal prerogatives. The states "should not be the exclusive overseer of the marketplace," he says. "The SEC is the primary enforcer in the securities market. The EPA is the primary enforcer in the environmental market. In the labor markets there is the Labor Department. By and large, we should be the secondary or tertiary enforcers. But in an era when there has been such retrenchment at the federal level, we become more significant. And when the structural breakdowns are of such magnitude that something needs to be done, as I would argue was the case with investment research and mutual funds and the Clean Air Act, we will jump in."

"The things I set out to do three, four years ago appeared at the time to be insane," Spitzer says. "Now everybody here today is saying, 'Look at all this notoriety that he's gotten.' Back then they thought I was nuts. Here I am, going up against the financial-services community. People thought it was political suicide. And the notion back then that I thought it was good politics is ludicrous. Nonetheless, I was concerned about giving these state agencies the latitude and capacity to intervene. It doesn't mean I hesitated, because I went after these cases, but now the genie's out of the bottle, and we're going to try and figure out how we cap it. How do we control this thing?"

When Spitzer, along with two members of his office staff and me, finishes the hour-and-fifteen-minute drive from Buffalo and reaches the closed-off grounds of the Chautauqua Institution, a hard rain has begun to fall. In the distance, beyond leafy paths, in a grand amphitheater built in 1893, where Franklin Roosevelt delivered his "I hate war" speech and where Spitzer will speak today, a choir makes itself heard.

By the time Spitzer is introduced as "the people's lawyer" by Chautauqua's president, Thomas Becker, one thing is clear: this is Spitzer country. Surveying the 3,000 or so people sitting on the yellow wooden benches of the amphitheater, one sees the core of Spitzer's constituency: educated, older, and largely white upper-class men and women—the sort of people who made the mistake of turning on CNBC one day and believing, really believing, that Pets.com would change the way our dogs ate.

With thunder in the background, Spitzer delivers not a speech but a sermon. He attacks the free-market-is-everything theories of the "Chicago School" of economics. He evokes Teddy Roosevelt, and the need for government intervention against self-interested actors who would distort the market for their own ends. And then, wrapping the audience more and more tightly in his grip, he tells the story of his negotiating with an unnamed investment bank—which is clearly Merrill Lynch—to try to reach a settlement before things escalated to litigation and a public fight. He says the negotiations weren't going well because he had demanded that the investment bank make its e-mails public, to reveal the truth of how the company had been operating. Everything else was on the table, he says, but he wanted the e-mails.

"The last phone call I got from the lawyer representing this investment bank went as follows," Spitzer says. "He said: 'Eliot, be careful. Be careful,' he said. 'We have powerful friends.'" There is a collective oooooh from the audience members. He has confirmed their deepest suspicions and reaffirmed their collective intellect. They weren't stupid or greedy—just deceived by bad, bad men. And because he can, he reaches higher, moving beyond Wall Street to what he calls "the crisis of accountability."

"It is government," he says. "It is the media. It is the not-for-profit sector. It is the CIA. It is our religious denominations. If you think about it, over the last four or five years there is hardly an institution that has not somehow been affected by this crisis of accountability. It makes you wonder what happened … What we are going through right now is an effort to resuscitate these values, and we do it the same way we did it with street crime. We become intolerant of even petty offenses in an effort to restore the moral regime we all know that we should live by."

Spitzer gets a standing ovation. He is a rock star now, and as such he is met after the speech by a group of people wanting a piece of him. Standing in the back entrance of the amphitheater, he gets an autograph request. One man, wearing Birkenstocks, has been a corporate lawyer for five years, he says, but now "I'd like to switch sides." Another man asks if Spitzer speaks to Harvard clubs. Spitzer says he prefers Princeton clubs, but yes, he'll address the Crimson.

Another groupie, a middle-aged man, comes up to him and says, "I'd like to say two things: that you stay in your ethics and that you run for President." "The first is more important than the second," Spitzer responds. "Trust me."

By the time Spitzer returns to Buffalo, the storm that thundered in the background while he spoke at the institution has fully dissipated. That's too bad—because to see the empty streets of that city in broad daylight can sink a person into despondency. Once the nation's eighth largest city, Buffalo has half the population it once had; much of the day you can see an empty trolley move from one end of downtown to another, passing empty storefronts. Buffalo is the home of great early-1900s architecture; most of its office space now lies fallow, the steel mills that lined Lake Erie are gone, and much of the waterfront is contaminated. The city's last flicker of renewal came four years ago, when the founder of Adelphia Communications, John Rigas, pledged to move a chunk of his company's operations to the city, bringing 1,000 new jobs and a fifteen-story waterfront office tower. Adelphia has since declared bankruptcy. In July, Rigas and one of his sons were found guilty on eighteen counts of bank fraud, securities fraud, and conspiracy. That tower was never built.

Buffalo is a forsaken place. And yet it is the second largest city in New York, and Spitzer has work to do there: a check-in with some of his deputies in the regional office; a press conference, with the U.S. attorney Michael Battle, to honor a Niagara Falls policeman for his work on Internet spamming and child pornography; a meeting with labor-union leaders in the local office of the AFL-CIO, which occupies a couple of fluorescent-lit rooms on the eighth floor of the Ellicott Square Building, designed by Daniel Burnham. At its christening, in 1896, the building was the largest office structure in the world.

"Mr. Governor," says John Kaczorowski, the president of the Buffalo Council of the AFL-CIO, as Spitzer enters the room. Thin, with a ruddy complexion, Kaczorowski has the eyes of many labor leaders I've met over the years: sixty-two going on 360. He worked for thirty-five years at a GM engine plant; for the past nine years he's held this job, representing 100,000 workers whose very livelihood and existence, one feels, could evaporate at any moment.

No, we're not in Chautauqua anymore. We're in a small office, crammed with fourteen labor leaders from the region, representing both public and private employees—men and women who can't afford to spend their morning hours attending grand lectures on the business of ethics or the ethics of business. It matters to them not at all which Ivy League clubs Spitzer is willing to make speeches at.

After some introductions Spitzer is given the floor by Kaczorowski and cuts quickly to their shared concerns.

"The thing I need to be asking is what can we be doing differently in terms of cases?" he says. "What can we be doing to help the economy here? We've all got that major need to keep the jobs, find others to come in. So on one hand, we're always looking for more cases to make, litigations, that's our day-to-day job. On the other hand, not just because I'm thinking of running for a different office in '06, what can we do to get jobs here, keep the ones we've got, and somehow take away the argument it's cheaper to do it somewhere else?"

With that Spitzer has opened the floodgates. There are complaints about the price of electric power—which, whether at residential or commercial rates, is among the highest in the nation. There are complaints about the fiscal clampdowns of the city's Control Board, put in place by the state to rein in Buffalo's finances, and about the price of gas, and about hospitals and nursing homes that are shutting down.

"For those of you that don't live here, you have no idea what we have to put up with," says Dan Boody, a representative of the Painters District Council #4. "We're fighting for our lives up here. We represent a lot of people; we have to provide a lot for them. Jobs are number one, but we keep losing our jobs—whether the company's been sold or they're being displaced. Somebody's gotta come into this town and take control. And it's not going to be the governor we have today. And if you're gonna be the guy, we've got some serious problems here and we need to make some changes."

As if he's inhaled all the disputes and predicaments and concerns and distresses of the room (and, beyond that, the region), Spitzer says, "What you're saying is right. We've got to somehow create a new economic model that's going to get new jobs here."

"Forget the individual cases," he tells the labor leaders. "There are two themes that run through everything: transportation and energy. You're simply not going to keep factories here, whether it's steel or GM or General Mills, if transportation and energy costs are high. Energy and transportation used to be our comparative advantage—business started here in the early part of the nineteenth century because of the Erie Canal, with proximity to lakes. We had cheap power. Now energy costs are higher, so they're moving to the Midwest and South, where they can be on the interstate with cheap energy that's paid for by the states."

"So those are the two things I can tell you where government can do better," Spitzer says. "And we have had completely misguided policies when it comes to them. And both are infrastructure issues. Government can't put a GM plant here, but government can go to GM and say, 'We'll give you [affordable] transportation and energy costs.' We haven't had coherent energy policies for twenty years."

Speaking softly, Kaczorowski says, "Things were rosy twenty years ago."

The next day Ken Langone, a co-founder of Home Depot and the chairman of the New York Stock Exchange's compensation committee from 1999 to 2003, is screaming in the Manhattan offices of his investment-banking firm, Invemed.

"I'm fighting for the little guy!" yelps Langone, whose wealth Forbes has estimated at $820 million. "How about some guy that doesn't have my resources or reputation? Or my track record? I'm proud of what I've done with my life."

One can understand, if not sympathize with, Langone's agitation: he is the only other person named in a suit Spitzer filed in May demanding that Richard Grasso, the former head of the NYSE, return more than $100 million of the $139.5 million compensation package he received in August of last year. (Three weeks after the size of his pay package was revealed, Grasso was forced to resign.) In his suit Spitzer charged that the NYSE compensation committee had been misled about aspects of Grasso's contract and that the formula whereby his compensation figure was derived did not accord with the rules that govern the state's not-for-profit status, under which the NYSE is registered. Frank Ashen, a top deputy of Grasso's, admitted to Spitzer's office that he had provided "incomplete, inaccurate and misleading" information regarding how much Grasso was making. An outside consulting firm, Mercer Human Resource Consulting, said in the suit that its analysis of the payment, which was submitted to the board, included "inaccuracies and omissions."

Langone, the son of a plumber and the first member of his family to go to college, was no longer a member of the compensation committee when it agreed to the $139.5 million, but he and his board recommended the payout. The figure, he says, was based on the internal recommendations of the NYSE board member Stanley Gault in 1995. Langone makes me read these recommendations from a black binder: in order to attract and retain "world class talent," the document says, Gault had advised that the NYSE needed to pay its executives the way top companies in the private sector paid theirs.

"When I turned over this committee to the new committee," Langone says, "I told them they had a complete free hand to do whatever they wanted to do with Grasso. They chose to go ahead and do what we would have done, but they had the freedom not to do it at all."

In the event, the committee voted unanimously for the $139.5 million payment. And Langone and Grasso (who sued the exchange in July for at least $50 million for defamation and breach of contract by his successor, John Reed) have found allies in both Spitzer's friend Jim Cramer and the Wall Street Journal editorial page.

"We've been very critical of the board of the NYSE and Spitzer," Paul Gigot says. "The attorney general has discretion on whether or not to follow up on a request. Let me put it this way: there's substantial political benefit in going after the poster child for executive compensation. That's easy."

"But if he loses in court," Gigot continues, "he'll have a black eye."

Pounding his hand against a table, the irate Langone, whom Spitzer is suing for $18 million, says, "Tell him this: Teddy Roosevelt would never do something like this. Teddy Roosevelt would never have filed the kind of complaint that he filed. You remember when Lloyd Bentsen was debating Dan Quayle, and Quayle was comparing himself to John F. Kennedy? Bentsen said, 'I knew John Kennedy; you're no John Kennedy.' I didn't know Teddy Roosevelt, but I've read a lot about Teddy Roosevelt. Eliot Spitzer's no Teddy Roosevelt."

It may very well not matter whether the state wins the case—not to Eliot Spitzer, anyway. The case may take years to reach court, and Spitzer (who, Newsweek reported, received a campaign contribution of $10,000 from the law firm now representing Langone) will be on the campaign trail, presenting himself as a man calling for accountability, for responsibility, for a new moral directive—helped along by government enforcement—in American life.

When I convey Langone's arguments to Spitzer, he replies flatly, "They can say whatever they want. They are not-for-profit, and they are bound by that structure. I've said repeatedly that I'll wait till we're in court to argue the facts. But this is one of the most unambiguous cases I've ever seen, where you have structure for determining compensation that was grotesquely flawed. Even if you were to accept their structure, what he was paid was tens and tens of millions of dollars above that flawed structure.

"We will win."