New York Attorney General Eliot Spitzer is rethinking the breakup of Merrill Lynch. He had reportedly considered splitting Merrill into two businesses, one with its investment banking and one with its research operations. The move would have been in response to the growing research scandal in which Merrill analysts seemingly rewarded underwriting clients with favorable research opinions.

Yesterday Spitzer told Bloomberg News that he is now "skeptical" of the breakup plan. "I'm not sure it works," he told the news agency. He added that he was also considering extending action to Goldman Sachs and Morgan Stanley Dean Witter, but industry executives convinced him that the plan would not be workable.

Merrill is now reportedly negotiating a settlement with Spitzer to avoid criminal charges. That settlement would reportedly include an admission of wrongdoing and a settlement for investors. Spitzer's staff members are set to meet with the Securities and Exchange Commission to review the case.  

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