Legal News

NYT: Cuomo Replaces Spitzer?s Sheriff With a Wall Street Reformer

By Dan Slater

Andrew Cuomo, as the Housing Secretary in the Clinton Administration, Dec. 23, 1998. As New York’s Attorney General, Cuomo says he draws more on his time as policy maker than on his time as a prosecutor. (Credit: Associated Press/Dennis Cook)

“We do cases in a way that exposes the problem, and then we identify the systemic reforms so the problem doesn’t happen again,” said Andrew Cuomo, New York’s Attorney General, contrasting his aims to those of U.S. attorneys. “Otherwise you play that game Whack-a-Mole.” Today, the NYT reports on how that focus on reform is going.

In the piece, Cuomo defends his approach to dealing with problems in the credit ratings and student-lender industries. Referring to the deal he struck with with the three biggest credit rating firms — Standard & Poor’s, Moody’s and Fitch — to reform how they’re paid by investment banks for rating securities, he said: “It was a sweeping reform which greatly improved the situation. Is it perfect? No. Very few things in life, let alone commerce and law, usually are.” Many place partial blame for the mortgage crisis on credit ratings agencies, who aided investment banks by awarding risky mortgage securities high ratings.

The NYT reports, however, that investor advocates say Cuomo has been too quick to accept deals, such as the one with the credit agencies, that don’t include significant reforms. Details of the non-public agreement (some of which, however, is made public in the NYT story) suggest it may be less punitive than initially understood. Sources told the Times that the agreement will expire three years after it is put in force and includes provisions that will ease the burden on ratings firms and big investment banks.

When it comes to enforcement, Cuomo is definitely taking a different tack than his predecessor. “Spitzer did have a kind of a notion that there were bad people out there that ought to be taken down a peg or two or three or four,” Richard Sylla, a financial historian at NYU, told the Times. “Cuomo seems to be a little bit cooler.”

Cuomo says he’s sought to use his office differently than Spitzer and other predecessors. He said that he draws more on his skills as a policy maker than as a prosecutor, and that financial cases, while important, are not his top priority, ranking health care as his No. 1 interest. “We are a product of our experiences,” he said. “Is it better or worse? Who knows. People will make that decision.”

Full post as published by Law Blog - WSJ.com on June 27, 2008 (boomark / email).