Spitzer's climate of fear.

IN THE U.S. SYSTEM of checks and balances, it is entirely appropriate that a state attorney general be on the lookout for crimes or abusive practices threatening that state's people.

But what we have witnessed recently from Eliot Spitzer, the attorney general from New York, fails the test of reasonableness. When an ambitious political figure, eager to become governor, essentially assassinates CEOs in public, isn't that an abuse of power? Have we reached the point that a supposed crusader for justice has crossed the line and lost credibility as a public servant? Is it wrong to allow a state attorney general to create a new regulatory climate by diktat that affects businesses across the country?

We think the answer to those questions is "yes."

Of course, if what Spitzer describes as a pattern of rigging bids is true, former Marsh & McLennan CEO Jeffrey Greenberg can be faulted for insensitivity to a changing environment. He should have known that the pattern of allegedly falsified bidding, however long it had been established, was not in keeping with the standards of governance that have been established post-Enron.

But as everyone involved in business realizes, there are many practices that fall into the gray zone. Markets are complex and laws cannot possibly govern every aspect. AIG had sought opinions from state insurance officials about what the industry was doing. No answers were forthcoming. The proper role of government would be to pursue remedies, perhaps legislatively or in quiet backroom discussions.

But to hit with a full barrage of criminal and civil charges was wrong. Spitzer essentially demanded Greenberg's scalp. Spitzer would not negotiate. A spineless board caved. A CEO was gone in 11 days. Rather than engaging in careful formulation of public policy. Spitzer is building his political career by collecting trophies.

What will Spitzer take on next? The beef industry in Nebraska? The citrus industry in Florida? Spitzer has created a climate of fear because he charges into industry after industry and criminalizes long-standing practices. "The interpretation of what is legal changes without notice," Ed Mullaney, president of the Rocky Mountain Machine Shop in Salt Lake City, told us in our CEO Confidence polling. "We find out after Spitzer or the SEC files charges against a company or individuals. It is tough to operate and make decisions with a legal system that changes like the weather."

If a re-elected President Bush wants to send a signal to the business world, or if the emotionally conflicted Securities and Exchange Commission Chairman Bill Donaldson wants to finally demonstrate where his heart is, they should start recreating an environment of common-sense regulation. And Spitzer must return to his role--as a state attorney general--not as a combined judge and jury.