ALBANY – With his latest bombshell lawsuit against the country’s largest insurance brokerage, Attorney General Eliot Spitzer is cementing his reputation as a force to be reckoned with on Wall Street.

Mr. Spitzer’s suit against Marsh & McLennan, alleging bid-rigging and fraud in the firm’s brokering of insurance contracts for businesses, goes well beyond seeking to punish a single company. It effectively indicts the practices of an entire business sector.

“The insurance industry needs to take a long, hard look at itself,” Mr. Spitzer said in his news release announcing the case last Thursday. “If the practices identified in our suit are as widespread as they appear to be, then the industry’s fundamental business model needs major corrective action and reform.”

Coming from an attorney general who has already humbled major investment banks and mutual-fund companies, these accusations were enough to trigger a massive sell-off of insurance stocks, even among companies with no direct connection to the investigation. The losses to Marsh & McLennan shareholders alone amount to $11 billion – the company’s share price plunged 46% in the past week.

Several insurance companies have already pleaded guilty in the case, and others have reported receiving subpoenas from Mr. Spitzer. Meanwhile, officials in other states are launching their own investigations of the contingency fees that many insurers pay to brokers in return for access to the best customers.

Officials at Marsh & McLennan, while not admitting guilt, have said they take the charges seriously and pledged to cooperate with Mr. Spitzer’s investigation.

The attorneys general of most states are relatively obscure figures who go through their entire careers without turning up any major scandals or overhauling even a single industry. Mr. Spitzer, by contrast, is beginning to rival the legendary chairman of the Federal Reserve, Alan Greenspan, in his ability to spook investors. So what is the secret of Mr. Spitzer’s extraordinary clout?

It begins with his perch as a public advocate with jurisdiction over the financial capital of the world and a broad mandate to enforce state laws and protect its citizens. Then there is New York business law, in particular the legendary Martin Act of 1921, governing security fraud, which gives him unusually sweeping investigatory powers.

What really sets Mr. Spitzer apart, however, is that he has the willingness, – and, some would say, the ambition – to take on the most powerful players in the business world.

“I don’t think anyone has approached Eliot Spitzer in using the office so aggressively,” said the research director of a business-affiliated think tank, Robert Ward of the Public Policy Institute.

Mr. Spitzer sued 10 of Wall Street’s major investment banks, alleging that their researchers colluded with brokers to exaggerate the value of certain stocks. The firms agreed in a settlement to segregate their research and brokerage operations more thoroughly.

Mr. Spitzer sued several mutual-fund companies, charging that they had allowed after-hours trading in their shares, benefiting major investors at the expense of average shareholders. The companies agreed in a settlement to stop those practices.

Mr. Spitzer sued the drug manufacturer GlaxoSmithKline, accusing it of covering up test results that cast a negative light on its products. The firm agreed in a settlement to post all research on the Internet, and other drugmakers followed suit.

“There’s really no magic to this,” Mr. Spitzer’s first deputy attorney general, Michele Hirshman, told The New York Sun. “We obtained information and we followed the leads.”

What they repeatedly found, she said, was that businesses were failing to protect consumers from conflicts of interest and instead “end up exploiting the conflicts to their own advantage.”

“What’s disappointing is, after Enron and after Sarbanes-Oxley, this conduct was still happening,” Ms. Hirshman said.

The attorney general’s press secretary, Darren Dopp, said Mr. Spitzer, a Democrat first elected in 1998, has filled a “void” left by the Securities and Exchange Commission and other federal regulators.

“If you had a reasonable, responsible, semi-aggressive federal regulatory structure, Spitzer wouldn’t be the force that he now is,” Mr. Dopp said.

Mr. Spitzer’s exploits have earned him widespread praise for cleaning up corruption among the rich and powerful.

“He has waged war against the criminals in the suites, whose negative impact on American society is far greater – and always was – than the crimes in the streets,” said a professor of public policy at Baruch College, Douglas Muzzio. “He has caused needed reforms in several different industries. It’s recognized even by the members of those industries that he’s doing the right thing, even though they hate him for doing it.”

Yet others argue that Mr. Spitzer is too quick to redefine accepted business practices as fraud, and sometimes bullies generally law-abiding firms into settlements to avoid the expense and embarrassment of a prolonged court fight.

“He has grabbed a great deal of power, not always using it badly,” said the editor of Overlawyered.com, Walter Olson. “Even when I don’t think he’s used it badly, power in that quantity is going to be abused. At some point people in the other 49 states are going to wonder why they can’t vote for him.” Mr. Olson is a senior fellow at the Manhattan Institute.

Many business leaders resent Mr. Spitzer’s tactics and view them as harmful for New York’s business climate but are reluctant to speak publicly against the attorney general.

“When you’ve got a prosecutorial environment, in which – even if you follow the rules set by your regulator – an attorney general can come in and retroactively change the rules, that is a hostile environment for business,” one prominent New York City executive said, speaking on condition of anonymity. “And it’s inevitably going to have an impact on business investment and job creation. … We’re not talking about the merits of the case. We’re talking about what’s good for the New York economy.”

However, the president of the Business Council of New York State, Daniel Walsh, said many business officials recognize that Mr. Spitzer is doing his job.

“He’s got an extraordinary staff,” Mr. Walsh said. “They are not fly-by-night people who just throw charges out. … I don’t think you can quarrel with his success.”

“It has never been [his] view that companies should be destroyed,” Ms. Hirshman said of her boss. “There are obviously people who have careers and jobs and investments, and that’s obviously an important factor that guides decision-making. At the same time the office has an obligation to enforce the law. So when wrongdoing is uncovered it has to be addressed.”