SPITZER's SPOOKS

No man or woman is not law to himself or herself. Not in free and democratic society. This may be saying truth in a negative sense. But negative some times makes matters truly positive. Indeed, the one on the street can speak his mind above even the law maker and demand his contention be heard. Unquestionable then when an attorney general like New York’s Eliot Spitzer speaks up, he not only is in all rights and even earnest, but also paid all attention.

So when last week Spitzer discovered that insurance companies paid brokers contingent commissions to buy prospective cover, he sort of sent shockwaves through the insurers as well as companies, financial markets and investors.

Nothing untoward. It’s Spitzer’s business to tell the world how and where the people in authority may be putting them at risk and even serving their interest rather than of those they are to meet.

But in all fairness and much appreciation of AG’s enterprise which borders effervescence, so often Spitzer has looked churly in his outbursts whether at people, like New York Stock Exchange’s former Chairman and CEO, Mr. Richard Grasso, companies, federal fund managers, listed brokers and their security analysts, even informers and the SEC chairman, Mr. William Donaldson.

In the instant case of contingent commissions by insurance companies there are certain qualifying conditions particular to the nature of business. What is more, the companies observe them in their much honored and time tested ways and manners. Maybe, Spitzer knows. Insurance companies in any case do. So they know.

The conditions to briefly enumerate are that in first place the commissions are provided for contingencies as different from normal insurance, secondly, they are payable by the companies to the insurance brokers in case contingency arises and finally, the companies must provide, as must the clients, consent in a contract to cover a contingent situation.

Spitzer surely can pinpoint eventuality. But the parties to the situation can meet the situation as and when it arises. Above all, it is insurance, and not chicken, for insured or insurer to take a chance. The implications otherwise can be far more complex and far reaching.

Spitzer, nevertheless, has made out a case against insurance companies, subpoenaed several, allowed insurance stocks to rile the market and hit investors. On the one hand, some believe the AG has rendered insurance stocks that are at the center of it rather cheap and certain to rebound as the dust let loose by Spitzer settles.

The question then is does Eliot Spitzer remain the AG he is, or also be the market regulator he is, and as which he appears inspired as would believe he may welcome to be as well vis-à-vis his compatriots?

Is it then simply spooks and sensation for him? Or is it also serious purpose?

For regulator’s writ and realm run larger than the Attorney General’s.