With Eliot Spitzer busy campaigning for governor, it was inevitable that other state-level officials would try to jump on the financial regulation bandwagon. Connecticut’s attorney general, Richard Blumenthal, is positioning himself to be first out of the gate. In the wake of the meltdown of the Amaranth Advisors hedge fund last month, Mr. Blumenthal has announced that he’s taking a special interest in the “regulatory void” surrounding the funds. No doubt his interest will also be piqued by a Wall Street Journal report issued last week that 23 of 41 economists surveyed said they think hedge funds need more regulatory oversight. Mr. Blumenthal has convened what is essentially a task force on hedge funds, although he’s at pains to tell us it’s only an informal group.

In other words, hedge funds based in Greenwich may want to start looking for new headquarters out-of-state. If any more regulation is needed, it’s in the area of federal oversight of banks that lend too aggressively to hedge funds, allowing the funds to over-leverage themselves, creating systemic risk in the event of a collapse and potentially leaving the federal government on the hook. If Mr. Blumenthal catches such a subtlety, it’d be a surprise to those who have followed his career. He promises us he’s still in the early stages of studying the issue and would prefer to defer to the feds instead of having to take action himself anyway. “I don’t want to disadvantage Connecticut hedge funds” by imposing excessively burdensome rules, he claims. His record, however, suggests otherwise.

On corporate issues, his most notable “accomplishment” was a ploy to block a hostile takeover of Stanley Works, a venerable but struggling Connecticut tool manufacturer who would-have-been new owners in 2002 floated the idea of re-incorporating Stanley in Bermuda to cut its tax bill. The paper move wouldn’t have cost any Connecticut jobs, but Mr. Blumenthal worked himself into a lather anyway and eventually browbeat Stanley into keeping its nominal headquarters onshore. Stanley paid the extra $30 million a year in American taxes. It also laid off 1,000 workers and closed nine locations. So much for not wanting to disadvantage Connecticut companies.

Nor is his financial prowess especially impressive. When he has ventured into securities litigation, it has often been on Mr. Spitzer’s coattails, as in the frenzy for suing insurance companies. He also has ensnared himself over the years in antitrust litigation, as in the 2004 to-do over an attempted merger between tech giants Oracle and PeopleSoft. Most ominously in light of his hedge fund stirrings, Mr. Blumenthal also went through a phase where he effectively tried to criminalize investment losses, joining Connecticut’s treasurer in a suit against Theodore Forstmann and Forstmann Little & Co. after Mr. Forstmann lost the state pension fund $125 million in legal but mistaken telecom investments. Mr. Blumenthal ultimately extracted a $15 million settlement.

Now Mr. Blumenthal is at it again. His recent kick seems to result from the widespread interest in the $6 billion implosion of Connecticut-based Amaranth. He talks about how Amaranth raises questions about the danger of systemic risk or distorting speculation in financial markets, when in reality the remarkable aspect of the Amaranth story is that both the energy futures market in which Amaranth lost big and the wider financial system barely felt Amaranth’s collapse. Mr. Blumenthal also worries about increased “retailization” of hedge funds to small investors. But advocates of greater regulation post-Amaranth have yet to produce any small investors who were wiped out by Amaranth, because there weren’t any.

Mr. Blumenthal might do well to defer to his state’s Department of Banking, which has also recently announced the formation of a new six-man unit to keep track of hedge funds. It sounds scary, but the director of the securities division, Ralph Lambiase, tells us the unit will serve mainly to build up a corps within the department that understands hedge funds. The unit will confine itself to old-fashioned fraud investigations. Mr. Lambiase says the Securities and Exchange Commission went too far in seeming to threaten routine unprompted investigations of hedge funds as part of its failed registration rule and that his new unit won’t make the same mistake.

Members of the Department of Banking unit will not be “trying to make names for themselves,” Mr. Lambiase say, adding, “that’s not good for the public interest.” Meantime, one economist participating in the Journal survey, Dana Johnson of Comerica Bank, was quoted as saying, “We would push them offshore if we tried to regulate with a heavy hand. Better to have them onshore with light regulation.” Mr. Blumenthal, take note.

If there’s one silver lining, it’s that Mr. Blumenthal’s adventures could create an opening for New York. By most accounts, the Empire State’s high state and local taxes have been the primary factor pushing hedge funds out of the city that has been the world’s financial capital. A new governor in Albany committed to cutting taxes and encouraging financial entrepreneurship could capitalize on any misstep Mr. Blumenthal might make. If Mr. Blumenthal doesn’t want the funds’ business, we New Yorkers will gladly take it back.