FOR more than half a century, states rights - the concept that government regulation is best carried out by the states rather than in Washington - has been a mainstay of the Republican gospel.
Now that the GOP controls the entire federal government, however, there's a new tune to this familiar political preachment.
A case in point is a bill, now working its way through the U.S. House of Representatives, which would virtually end state efforts to police the securities industry.
Sure, some regulation is best handled by federal agencies, but, given the repeated corporate scandals that have swept Wall Street in the past couple of years, it is hard not to be suspicious that someone is out to put a leash on the securities watchdogs.
In particular, the proposal, approved last week by a House subcommittee, likely would have negated the $1.4 billion fraud settlement in April against 10 of the nation's leading investment firms.
This was the case that exposed in dramatic fashion how investors were swindled when the stock market bubble burst three years ago.
Even as overpriced stocks tanked, analysts for brokerage firms continued to hype the securities in order to get underwriting business for their employers.
Eliot Spitzer, attorney general of New York, laid the groundwork for the settlement with investigation of the firms under an old state law. Only then did the federal Securities and Exchange Commission step in.
The new bill, sponsored by Louisiana Republican Richard Baker, would prohibit the states from imposing disclosure rules or conflict of interest requirements on brokerage firms, essentially ending state securities regulation.
Such a move makes little sense, since state regulators have taken the lead in curbing abuses of the 1990s, including day trading, the sale of penny stocks, and the analyst conflicts uncovered by Mr. Spitzer.
“We've just been through a period where there's one conflict of interest after another,” Christine Bruen, Maine's securities administrator, told the New York Times. “The idea that you would take out your local cop on the beat ... is a giant step backward.”
Unfortunately, Mr. Baker's legislation now is in the willing hands of one of Capitol Hill's most fervent friends of Wall Street, Rep. Michael G. Oxley, Republican of Findlay, who heads the House Financial Services Committee.
Savvy Congress-watchers will remember that it was Mr. Oxley who managed to put his name on last year's major securities-regulation bill, even as he worked behind the scenes to water it down.
Shutting down state regulators is no cure for the ills that still infect the stock market. What investors want is confidence that someone with authority is looking out for their interests.