ALL BUSINESS:Spitzer Gone,reforms Remain

One e-mail showed star Merrill Lynch & Co. analyst Henry Blodget describing InfoSpace Inc., one of the firm's highest-rated stocks, as "a piece of junk." Another exchange had Salomon Smith Barney telecommunications analyst Jack Grubman telling a friend that his recommendation of AT&T stock helped secure spots in an exclusive Manhattan nursery school for his twin daughters.

Ten Wall Street firms eventually agreed to a $1.4 billion settlement, and new rules were put in place that separated banking and research. Independent research was also made more available to investors, and the firms were required to disclose potential conflicts of interest.

"Sheriff" Spitzer had arrived.

Spitzer also began uncovering that mutual fund brokers had been giving special trading privileges to select clients. One was called "late trading," an illegal practice of accepting buy and sell orders at the 4 p.m. price long after the market closes. There were also issues of "market timing," which allowed short-term trading of funds intended to be longer-term investments. Market timing is largely legal, but many funds prohibit it because it gives the larger firms an advantage over smaller investors.

That meant some investors were profiting at the expense of others, and mutual fund boards had fallen down on the job by not protecting the interests of all their shareholders. The mutual funds, including Bank of America, Putnam and Janus, ended up paying multimillion-dollar fines and regulators enacted new reforms to eliminate the practices.

Spitzer kept finding new corners of the financial world to sniff out. He was still on the prowl after leaving the attorney general's office to become governor in 2007. Just last month, he testified before Congress about the financial woes facing bond insurers.

As his probes expanded the list of wrongdoing he uncovered, the criticism against him also grew. Spitzer's targets would talk of his heavy-handed role and bullying demands. Some called his attacks overzealous, nasty and personal, most notably in the case against former New York Stock Exchange Chairman Richard Grasso's $187.5 million pay package a case that still hasn't been resolved.

Many on Wall Street grew to fear and despise Spitzer. That's why there were cheers on trading floors when the news broke Monday that the 48-year-old father of three identified in court papers as "Client-9" spent thousands of dollars on a call girl at Washington's swanky Mayflower Hotel on the night before Valentine's Day.

"I'm deeply sorry that I did not live up to what was expected of me," Spitzer said during Wednesday's news conference when announcing his resignation.

At that moment, much of the good he did was tainted with the whiff of scandal.