Spitzer's attempt to refloat the bond insurers can be viewed as one of several attempts to make nice with the financial services industry. A couple of short-sellers aside, most of Wall Street has an interest in keeping the monolines, a reliable conduit to the pockets of retail investors, open for business. It's not as if Spitzer's departure is likely to end efforts to rescue the bond insurers, and it could be that the role of New York state's government in the effort has already been superceded. But while the Spitzer/Dinallo wrangling was designed to deal with continuing issuer access to market rather than protect investors, stabilising the market is an area where the interests of the two coincide. Leadership of the effort is already shifting, in particular to California. But California has an almost innate distrust of the financial services industry. Any investment banks that are currently cheering the downfall of their nemesis should remember that moment when Bill Lockyer manages to get their monolines dismembered.

I don't think it's unfair to say that Spitzer's replacement, David Paterson, won't take so close an interest in the monolines and Wall Street generally. Spitzer came to the governorship through the District Attorney's office, where he spent a lot of time on white-collar crime. Paterson's background is quite different; he was a Manhattan state senator with a reputation as a political reformer and an interest in transformative technology. So Eric Dinallo is likely to be given a bit more latitude in his efforts - he'll carry on the work that he and Spitzer began, but alone. (The FT predicts that without Spitzer's backing, he'll have a hard time of it; and the federal government may take over more of the regulatory work itself.)

More bad news for the monolines - their rent-seeking muni business could be at an end as rating agencies bring muni and corporate ratings into line. About time too.