Defending States' Rights -- Except on Wall Street -- E. J. Dionne Jr.

States' rights are a matter of high principle -- except when they become inconvenient to some powerful interest group. Then they can be ignored or swept aside.

That lesson, taught over and over, will be put to the test again, perhaps as soon as tomorrow. That's when the House Financial Services Committee may take up a proposal that would sharply restrict the power of state regulators to oversee the securities industry. The measure, introduced by Rep. Richard Baker, a Louisiana Republican, would prevent state regulators from working independently of the federal Securities and Exchange Commission in seeking structural changes in the way brokerage houses and investment banks work.

In other words, if federal regulators are asleep at the switch, states won't be able to step in. No wonder the bill is being seen as a direct slap at New York Attorney General Eliot Spitzer, who forced the securities industry to end stock analysts' conflicts of interests in a settlement last year. Spitzer embarrassed the industry when he released e-mails showing that research analysts were privately trashing stocks that they were recommending to the public.

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http://www.washingtonpost.com/wp-dyn/articles/A26011-2003Jul21.html