This was especially so because of the lack of respect that some state officials believed they were accorded by those on Wall Street. A regulator in one state said he heard through the grapevine that executives at one brokerage had actually cheered after learning that his state would lead the probe of their company.
"They thought, 'There's no way these underpaid state employees going up against $400-an-hour lawyers could put this case together," said another regulator, Joe Borg, the Alabama securities chief who spearheaded the Lehman Bros. probe. "That was a big motivator."
At one meeting last week, Borg recounted, he and his counterpart from the SEC turned to Lehman's lawyers and said, "OK, we'll see you in federal court on Tuesday and state court on Wednesday."
NYSE Chairman Grasso played a key behind-the-scenes role throughout, sources said.
Efforts to reach a settlement initially were hampered by a feud between Spitzer and then-SEC Chairman Harvey L. Pitt.
Spitzer's investigation of Merrill Lynch analysts last spring, which ended with the firm assenting to a $100-million fine, had kick-started the broader analyst inquiry. The SEC worried that Spitzer would overstep his boundaries and usurp its authority to set national market standards. Spitzer fretted that Pitt would not be tough enough on Wall Street.
Those differences were smoothed over at a meeting convened by Grasso in October.
Grasso also was instrumental in prodding the recalcitrant firms to come to the table in the final week, one source said. While Spitzer focused on the five largest firms, Grasso lobbied the four smaller ones.
SEC enforcement chief Stephen Cutler played a central role as well, one official said, relaying offers between the two sides like a State Department envoy practicing shuttle diplomacy.
In the end, regulators said, the firms got the message that it was time to do a deal.
"What brought it across the finish line," one official said, "was the regulators said, 'We're done. We've talked enough.' "
Times staff writer Thomas S. Mulligan contributed to this report.