Revelations reported yesterday that New York Gov. Eliot Spitzer used the services of a prostitute could complicate the state's budget process and left market participants wondering what to expect next.
The governor publicly apologized yesterday to his family and the public after the New York Times reported that he told senior staff that he was implicated in a federal prostitution probe.
"I have acted in a way that violated the obligations to my family and that violates my - or any - sense of right and wrong," Spitzer said during his
Although he made no mention of resigning, should Spitzer leave office before the end of his term in 2010, Lieut. Gov. David Paterson would take his place. The state budget is due on April 1.
"Given all the complicating issues going on now related to auction rates and the budgets the proposed issuance and proposed projects like the Moynihan Station that this occurrence is going to be jarring in terms of affecting the ability to get things done," said Frank McKenna, managing director at Raymond James Associates, Inc. "I hear good things about David Paterson, I hear he's a smart guy, honest guy."
McKenna said that state agencies and authorities have competent people in place who can get things done. But dealing with issues like the bond insurance credit-ratings turmoil, which Spitzer has been heavily involved in, and a resolution to problems in the auction-rate market "will be really impacted by this occurrence."
"It's likely to complicate things without a doubt, but budgets in New York have been late before," one market source said. "New York state is a strong, creditworthy place. [The state's credit] is not going to revolve around one man and what may become of him."
Another source said "since New York is in the midst of its budget process, it raises a lot of questions about the quality and intensity of the leadership of the budget process."
Spitzer has had a bruising battle with state Senate Majority Leader Joseph Bruno and seemed to be just getting past a scandal over the use of state troopers to investigate Bruno.
"We need to stay focused on the challenges ahead and move forward and get a budget done," said Bruno spokesman Mark Hansen yesterday.
According to news reports, an alleged solicitation of a prostitute by Spitzer took place during a trip to Washington, D.C., on Feb. 13, the day before Spitzer testified before Congress about turmoil in the bond insurance business, the need for additional federal or multi-state regulation, and the faltering auction-rate securities market.
