Under fire, NY governor Paterson says he's not resigning

Governor David Paterson in Albany, March 17, 2008.

NEW YORK (Reuters) - New York Governor David Paterson on Monday restated his intention to run for governor and denied rumors he might resign over potentially scandalous allegations in a forthcoming news report that fueled new speculation about his political future.

Paterson, already facing a probable challenge for the Democratic Party nomination from state Attorney General Andrew Cuomo, took over as governor in 2008 after then-Governor Eliot Spitzer resigned in a prostitution scandal.

Media blogs including the Huffington Post have been reporting The New York Times will soon publish a story so explosive that Paterson would have to resign.

But Paterson told that newspaper's editorial board he had no intention of quitting and would formally announce his candidacy in the next two weeks.

"I don't see any reason that I shouldn't be running for governor," he said on Monday.

Earlier, Paterson's spokeswoman said reports of his impending resignation were "entirely fabricated."

"This is a new low even by the standards of Planet Albany," Marissa Shorenstein said by e-mail in a reference to the state capital. "The circus of the past week, entirely fabricated out of thin air and innuendo, is an embarrassment for all who have played a role in fueling it."

When he became governor, Paterson admitted he had been unfaithful to his wife.

New York political watchers expect Paterson to face a primary election challenge in September from Cuomo, son of former Governor Mario Cuomo and a former housing secretary under President Bill Clinton.

Cuomo, who leads Paterson in opinion polls, has raised $16 million compared with Paterson's $3 million, although the attorney general has yet to officially declare his candidacy.

Paterson's approval rating has been low for months and last week hit 26 percent in one statewide poll. He is grappling with a budget deficit that has risen $750 million to $8.2 billion since he proposed a $136 billion budget in January.

President Barack Obama asked Paterson months ago not to run for election this year because he could not win, according to a New York Times report last September.

"I think they are circling around him," said Lee Miringoff, director of the Marist Institute for Public Opinion. "Conventional wisdom is that he won't end up running. This could be the last straw or the final act."

PATERSON STILL COMBATIVE

Paterson told The Times' editorial board that Cuomo's popularity was due largely to him avoiding political risks and benefiting from a popular post in government.

"The public ... want to know a little more about a candidate other than the fact that he raises money and he has high poll numbers." Paterson said. "I don't know an attorney general that had low poll numbers. You don't usually have low poll numbers when you arrest people so much."

Times spokeswoman Diane McNulty declined to comment.

Cuomo is credited for having carried on where Spitzer, his predecessor as attorney general, left off in investigating financial crimes.

Cuomo led in forcing many big U.S. and foreign banks to unfreeze tens of billions of dollars of so-called auction-rate securities. He has also won several guilty pleas in his criminal probe into corruption involving the state's pension fund, one of the nation's largest.

Last week, Cuomo filed civil fraud charges against Bank of America Corp and two top executives over the company's controversial takeover of Merrill Lynch & Co.

(Additional reporting by Joan Gralla, Jonathan Stempel and Thomas Ferraro; Editing by John O'Callaghan)