'We may have over-inflated the bubble...'Merrill Lynch is paying out $100m to settle a 10-month legal investigation into its behaviour during the dot-com boom. The US investment bank, which was one of the most enthusiastic cheerleaders for dot-com start-ups, will pay $48m to the state of New York and $52m to other US states and regulators. The investigation was brought by New York State Attorney General Eliot Spitzer, a 41-year old Democrat who is already being talked about as a future president on the back of this success. The settlement includes a range of new measures intended to resolve the long-standing conflict of interest between the investment banking and research arms of the big Wall Street banks. Investment banking divisions handle lucrative contracts such as initial public offerings, while the research units are meant to provide impartial advice to clients on which stocks to buy. However, Merrill and various other investment banks have been accused of abandoning impartiality and using their research departments to help win investment deals. In addition to the cash payments, the Merrill Lynch settlement demands that new policies are put in place to stop research analysts being paid bonuses for winning investment banking business from their research subjects. It also calls for the introduction of a new committee at Merrill Lynch to oversee the objectivity of the bank's buy and sell recommendations. It also calls for a system to monitor emails going between the two departments of the company. Merrill was particularly embarrassed when Spitzer revealed internal emails describing recommended stocks as "pieces of junk". Today's settlement represents the beginning rather than the end of the legal fall-out from the dot-com bubble. All the major US investment banks have been subpoenaed by Spitzer, and numerous individual and class-action suits are still outstanding.