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The Potential Damage From Over Zealous Regulators

Over zealous regulators are trying to make names for themsleves by going after financial services and the damage will be to the economy

By Joel Ross | Updated on May 17, 2011

Lending and capital raising are going to get more regulated and complicated than we had all hoped. In New York the new AG, Schneiderman, is on a initiative to investigate and regulate the financial services industry. He is new, politically motivated, and a long time friend of Cuomo. Translation, he is out to make a name and that means he is out to get big name lenders on some charge and to create new regulations. He has now opened a new investigation of mortgage lending and CDO’s etc. As though we need another such party doing the same investigation. Schneiderman will want to p[rove he is better at getting the “bad guys” than the feds and others so it is likely he will dig to find anything to get in front of the media. This could be Spitzer revisited. Cuomo will be a big supporter of this effort as it makes good populist media attention. The worst part of the NY laws know as the Martin Act, is that there is no requirement that the prosecutor prove any intent to defraud as there is under federal statute. That gives state prosecutors a lot of running room.

Just in case this is not enough, Cuomo has appointed a long time chief of staff, Ben Lawsky to be the head of the NY State agency just formed to control and investigate financial services institutions. In short a fishing license supported by the governor and the AG. This new agency will consolidate all NY State regulators in one agency and it will have huge abilities to regulate any financial services company doing business in New York. Just imagine in this time of get the big bad banks and Wall St what this will lead to. Lawsky was the one behind many of Cuomo’s headline grabbing investigations on his way to be governor.

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