Watching Attorney General Spitzer plunge ahead in his high-profile prosecutions under the Martin Act, we start to get the feeling that many of us had during the era when a United States Attorney named Rudolph Giuliani was abusing the Racketeer Influenced and Corrupt Organizations Act. Both cases featured a politically ambitious young prosecutor using an extraordinarily vague law for purposes other than its original intent. No doubt that in both campaigns some cases resulted in real abuses being stopped. But little doubt, too, that in other cases the main end served by the aggressive use of a vague law was the advancement not of justice but of a political career.

We carry no brief one way or another for the hedge fund Canary Capital Partners LLC, or its managing principal, Edward Stern, and the two related entities whom Mr. Spitzer has just forced into a $40 million settlement, without an admission of guilt. But the settlement was gained not through the the adversarial proceeding of a trial but by wielding a piece of New York State legislation from 1921 that promised what Canary, in a statement, called “protracted and complex litigation” that the company apparently reckoned wasn’t worth the candle.

The Martin Act is what is known as a “blue sky” law, passed by New York in an age when fraudulent stock schemes proliferated that were so transparent as to have no more merit that “the blue sky above,” as a backgrounder from the Washington Legal Foundation put it recently. Starting in 1911, states began adopting these laws, and by the time the first federal securities laws were adopted in the 1930s and 1940s, virtually every state had one. As the federal government took over securities regulation, however, the state statutes fell into disuse. It has only been lately that Mr. Spitzer, lusting for higher office, has dusted off the Martin Act. Most prominently, he used the Martin Act to squeeze a $100 million settlement out of Merrill Lynch & Co. in 2002, based on allegations of analysts’ conflicts of interest, again without an admission of guilt.

Why is the act so powerful that big companies quail? Martin turns out to be extraordinarily broad, and it has little history of being interpreted, or reined in, by the courts, according to attorneys being quoted by Dow Jones Newswires. The law’s fraud provisions, for instance, can be violated without any proof of willful and knowing commission of an illegal act or any proof of intent to defraud. Further, a person can be prosecuted for employing “any device, scheme or artifice to defraud,” language critics feel is overly vague. According to a partner at Carter, Ledyard and Milburn, Robert McTamaney, a critic of the law who spoke to Dow Jones yesterday,”The records of potential defendants are thrown wide open.”It’s a law that, like RICO, leaves little confidence that even the innocent could mount a defense.

The question of whether hedge funds need more government oversight may be up for debate, but Mr. Spitzer’s use of the Martin Act has put the attorney general on a collision course with the federal securities regulators. In the Congress, the chairman of the Capital Markets Subcommittee, Richard Baker, a Republican of Louisiana, has begun moves to rein in Mr. Spitzer — especially since so little of Mr. Spitzer’s work to protect investors actually goes to reimbursing investors as opposed to lining state coffers. So far, the attorney general has pursued a strategy of taking on high-profile cases and trying to tar any opposition to his power grab as a defense of a corrupt corporate America. But he lacks one card that the feds hold, the Supremacy Clause of the Constitution. It mandates that federal laws “shall be the supreme Law of the Land.”It’s a thought to make Mr. Spitzer’s blue skies turn gray.