New York's banking and insurance regulators and attorney generals are among the nation's most important state watchdogs because it is home to so many financial giants. And federal
regulators sometimes heed New York developments, as the former state attorney general showed with his Wall Street probes.
The Democrat, who became governor in January, told reporters a new commission he has created will recommend how the now-outdated regulatory system should be overhauled by June 30, 2008.
The current framework was devised when federal laws, including the 1933 Glass-Steagall Act, curbed banks' commercial activities, and banks, insurance companies and securities firms
did not share corporate parents.
But in 1999, the Depression-era federal banking law was repealed. And financial firms now compete globally, not nationally, and offer what Spitzer called a full array of services.
"It no longer makes sense to regulate each of the separate areas as an independent business endeavor," the governor said.
"We are bringing different measures of risks across various investments which are being made by different companies, and it no longer provides any logic, and it has become, I believe, an
impediment to some business done here in New York State."
Spitzer said the new panel, led by Insurance Superintendent Eric Dinallo, will draft a more coherent regulatory system that also will make the state more competitive. It will examine, for
example, whether New York should adopt a principle-based framework, instead of a rule-based system, he added.
Spitzer said, “We want to ensure that the regulatory framework is an affirmative one,” and not viewed as “hostile or incoherent” by domestic and foreign firms.