New York State banking superintendent Diana L. Taylor may be soft-spoken and quick to note she has been on the job only six months, but Wednesday she did not hesitate to plunge into regulatory turf wars.

Addressing a group of bankers and regulators at American Banker's third annual Banker of the Year Awards dinner, Ms. Taylor delivered tough talk on federal preemption of state laws (the Comptroller of the Currency was in the audience), slammed the Securities and Exchange Commission and others for devoting too much energy to enforcement (the head of the SEC's Public Company Accounting Oversight Board was there, too), and complained about a lack of funding for agencies.

She took the SEC to task for acting less like a regulator than "an enforcement agency" that "concentrates only on catching and prosecuting malefactors after the fact."

"Effective supervision and regulation catches and treats the problems detected in financial institutions before they metastasize into public enforcement actions," Ms. Taylor said.

"That is important because that public punishment - the arrests of traders, the Enrons and Tycos - often engenders not only a loss of public trust but also a landslide of legislative remedies."

The SEC, she said, "is no longer a regulator or supervisor" and "does not work with its regulated entities to come up with systems to comply with ever-changing laws and regulations in an ever changing market. It does not have the staff to do that."

On Thursday a spokesman for the SEC declined to comment.

No less pointed were Ms. Taylor's digs at the Comptroller of the Currency John D. Hawke Jr. for his agency's recent moves to preempt state laws against predatory lending.

"One does not necessarily have to agree with laws as they are promulgated, but there is a right way and a wrong way to seek to change a law," she said. "The right way is in public through the legislative process. Regulatory fiat is not the way to do it."

She said New York's predator law "may not be perfect. But it should be up to us to change it."

Ms. Taylor then directly addressed the comptroller, who was in the audience. "Jerry Hawke, I'm talking to you," she said, prompting laughter.

In an interview after her speech, Mr. Hawke said he has "enormous regard for Diana Taylor," but "I think she's just 180 degrees wrong on preemption, and 180 years of judicial precedence [have] established the error of her ways."

Ms. Taylor said regulators are spread thin by a combination of new unfunded mandates and inadequate resources to carry out old ones. For instance, a law passed by New York's Legislature in April requires that her department license and regulate credit counselors.

"This was a very good thing for them to do, but no additional resources were added to carry this out," she said. She said her department has "made no new hires in the last two years, in spite of attrition from an already stretched work force. Does this give you confidence?"

Ms. Taylor asserted that the OCC "is just as strapped for resources as my department. How on earth are they going to manage all of what they are positioning themselves to do without putting consumers and banks at risk?"

Mr. Hawke's response to that last point: "Utter nonsense."

"We are well funded," he said. "We are well staffed. We are not suffering any of the kind of budget pressures that the states are suffering. We've been running budget surpluses all the years that I've been in office."

He also said he disagreed with Ms. Taylor's broader argument.

"Vigorous enforcement sends a message to potential wrongdoers to get their acts in order," Mr. Hawke said. "And it does it in a way that doesn't impose cost burdens of regulation on everybody."

Ms. Taylor - who described herself in an August interview with American Banker as "a free-market person" - acknowledged that laws and regulations, particularly those drafted in the wake of scandal, often prove a hassle to businesses. They can be "overarching and sometimes overprotective."

That is all the more reason, in her view, to arm bank oversight agencies with better resources to prevent fiascos - a notion that led a banker in the audience to quip, "I guess our taxes are going up."

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