The attorney general of New York, Eliot Spitzer, is in quite a lather, we see, over the moves in Congress to protect the national markets. He’s put up on the World Wide Web a press release attacking the work the Capital Markets Subcommittee is doing on the Securities Fraud Deterrence and Investor Restitution Act. The subcommittee, chaired by Representative Richard Baker, a Republican of Louisiana, passed an amendment that would reinforce the authority of the Securities and Exchange Commission to set federal securities laws by extending certain national guidelines to agreements state authorities are reaching with companies they are regulating. General Spitzer calls this not only “outrageous” but “particularly outrageous.”

In fact, what lies behind this little dustup is an old-fashioned feud over money. People like Congressman Baker want to make sure that the proceeds from settlements with securities violators get passed back to the ordinary investors who people like General Spitzer claim were defrauded. People like General Spitzer and those who regulate securities matters in other states want this money to be paid to their agencies, or at least to their state governments. If you want to imagine where the money’s going to end up, look at what happened in the big tobacco settlements. The people who got first dibs on the money were not the poor smokers but the trial lawyers who brought the suit. Funds that got handed over to the states instantly became the subject all sorts of grabs, such as what Governor Pataki has been trying to do during the New York budget crunch.

When Congressman Baker and his subcommittee colleagues sought to write a law ensuring that settlements with securities violators actually reached investors, the National Association of State Securities Administrators, which also includes attorneys general, went bananas. So the Congressman, a reasonable fellow we gather, agreed to let the states keep the lucre. But the committee then amended the proposed law so that in reaching these settlements at least the states would have to follow some national guidelines. In other words, the committee doesn’t want to see the 50 different states balkanizing the enormously efficient national market, just so the state attorneys general can go looking for cash for their state governments or, worse, for their own departmental coffers. That doesn’t sound particularly outrageous to us.