WASHINGTON — The ongoing turmoil in the capital markets could spiral out of control and lead to a “financial tsunami that causes substantial damage throughout our economy,” New York Gov. Eliot Spitzer is expected to say at a House panel hearing on bond insurers tomorrow. Click here to see Spitzer's Testimony.But rather than blame specific market participants for the credit crunch, Spitzer plans to urge state regulators, banks, and rating agencies to work together to strengthen the bond insurers. He said a new federal regulator for insurers is not necessary.

“As the primary regulator, the New York Insurance Department has the powers and ability to deal with the issue,” Spitzer is expected to say, according to a copy of his testimony. The department “responds to more than 60,000 consumer complaints a year. I’m sure most other state insurance departments are just as active. I don’t know of any federal regulator that is that responsive to consumers.”

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