First things first:
I need to make a shameless plug for my analyst liability article that touches on some of the issues raised on the blogs:
A Response to Professor John Coffee: Analyst Liability Under Section 10(b) of the Securities Exchange Act of 1934, 72 Cin. L. Rev. 1305 (2004).

Now, two things to which I would like to respond:
(1) Is the world different? ABSOLUTELY.
a. There is much, much less touting from analysts for exactly the reason you suggest - analysts do not want to cover stocks that are iffy enough to likely merit a "sell" some day. Further, the MDs won't let them and/or the GC will often stop them. So is there still an implicit agreement that good press will "earn" banking business? I don't know. I do know, however, that bad press will likely NOT earn banking business, so we have more analysts keeping their views to themselves instead of inaccurately covering the dogs out there. I have *ZERO* problem with that.

b. I think finally the analysts are being recognized for what and who they are (or at least were). We went from a place of generally useless boilerplate disclaimers on reports ("Bob's Investment Bank might do business with or hold a position in . . . ") to useful disclosure of what the I-bank is doing in the stock, what the analyst is doing, and whether the analyst actually believes what he is saying. Moreover, since maybe 2002-ish or 2003-ish, the public has been becoming more and more aware of the fact that some analysts are better viewed as salesmen than as objective reporters. There is less reliance now, in my view, on the pontifications of the high-profile analyst-of-the-week, and we certainly see fewer analysts popping up on the morning business news.

(2) Are we going to see an analyst for a big bank drop coverage to a sell on a client (or big protential client) or will the "whiny analyst guy" be kept in line?
I think we will see the former, after much bellyaching, loophole-seeking, outside counsel consultation, swearing, and sweating. Remember that the banks paid some big honking lump sums of money to settle some (SOME, mind you) of the analyst cases. http://www.globalresearchanalystsettlement.com/appendix_a.pdf
Other cases live on.

While the pessimist might observe that the dollar amounts in the global settlement are chump change to the banks, the pessimist would be failing to note that (a) additional money outside the settlement was paid to settle other claims, (b) the negative press regarding the banks was relentless for a good 18 months, (c) not all claims have been resolved, and (d) the litigation costs for these banks were huge, both in money and in reputation (do you remember the "this stock is a pig" sort of e-mails made by analysts about stocks that they were touting that were released to the public as a result of all of the litigation?)
I am of the view that it took a while to get the big banks on the bandwagon, but I am now of the view that the GCs at the big banks know well how painful it is to be on the wrong side of an analyst liability based claim. If the choice is to drop to a sell on BIG PUBLIC ISSUER CLIENT, or risk a painful, time-consuming, costly suit, the choice is no longer easy.

In response to the mention of Prof. Ribstein, I politely suggest that I disagree with him on how he views the volitility that follows disclosure in a post-Reg. FD world. That volitility will be mitigated, true, if selective disclosure was made to "the most expert and active analysts [to] tell them more about what’s going on, including the tax issue." (Ribstein's words) But one of two things would be happening to alter that volitility:
(1) The analysts would be told, in advance, of the tax issue, and they would tell their big clients, who would then trade ahead of the news and soften the market before Google made its public disclosure. This would be bad. (Think "insider trading" sort of bad)
(2) The analysts would be told, in advance, of the tax issue, and they would sign a confidentiality agreement with Google, in which the analyst agrees not to speak publicly until Google itself publicly disseminates the earnings and tax issue news. While waiting for the public disclosure by Google, the analysts could be preparing their comments on the issue in anticipation of whatever speaking (newsflashes, fax flashes, notes, letters, etc.) they will do after Google has made its announcement. The analysts would be able to quickly cut off much of the fear selling in that manner (by speaking about their interpreation of Google's bad news soon after the disclosure), while also stopping their big clients from driving the market down (and encouraging a follow-on panic sort of sell). This would be good.

As a "p.s.," volitility, in and of itself, is not bad. If Google's stock price dropped because folks mis-interpreted the earnings release, so what? The stock price will correct itself soon enough (or else Google will remain as a bargain buy). If the choice is between volitility or analysts' favored clients trading ahead of the market, I prefer the former.