State Regulator's Quest Continues

State regulators fought two battles against federal officials in their continuing quest for autonomy in the oversight of financial institutions. They won one and lost one.

The victory came when the House Financial Services Committee struck language from an investor protection bill that would have diluted the powers of state securities regulators when they pursued fraud cases. The language has been put into the bill largely in response to aggressive moves by regulators in New York, Massachusetts, and other states against brokerage firms and mutual funds.

On the downside, on Feb. 12^th, new regulations issued by the Office of the Comptroller of the Currency placed all authority to regulate national banks at the federal level. As a result, state banking laws have been pre-empted or nullified. Under the new rules banking regulators say they can no longer enforce state consumer protection laws against national banks and their units. Eliot Spitzer, the attorney general for New York, has filed a lawsuit challenging the measure.

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