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NEW York Governor Eliot Spitzer has resigned amid a scandal over a $US1000-an-hour ($1070) prostitute, ending a career built on pugnacious investigations of Wall Street crimes and an image of moral rectitude.

His deputy, David Paterson will replace him next Monday, Mr Spitzer announced in a brief statement that dwelt on his remorse for "private failings."

Mr Spitzer, a Democrat, had faced intense pressure to resign and impeachment threats from Republicans after The New York Times reported on Monday that he was caught on a federal wiretap arranging a meeting with a prostitute in a Washington hotel room.

He still faces possible criminal charges. The chief federal prosecutor investigating the prostitution ring in question announced that he has not reached an agreement with Mr Spitzer about settling any criminal matter.

Mr Spitzer, 48 and married with three daughters, is a former New York state chief prosecutor who rose to prominence by investigating financial crime with a publicity-conscious vigor that earned him the nickname Sheriff of Wall Street.

"Over the course of my public life I have insisted, I believe correctly, that people, regardless of their position or power, take responsibility for their conduct. I can and will ask no less of myself. For this reason I am resigning from the office of governor," Mr Spitzer said.

Once viewed as a rising star among Democrats, Mr Spitzer made his announcement in a grim-faced appearance at his New York headquarters, with wife at his side.

His disgrace was cheered by some financial power brokers who resented what they considered his heavy-handed and self-righteous ways.

"Wall Street is enjoying he got his comeuppance," said Michael Metz, chief investment strategist at Oppenheimer and Co.

Mr Spitzer made no specific reference to the allegations surrounding him. He had also given no details when he apologised to his family and the public on Monday for what he called a "private matter."

Between the two appearances he shuttered himself inside his New York City apartment as pressure grew for him to quit and reporters massed outside.

"He was an icon, a model of integrity, an enforcer of public and private morality and then you`ve got this utter hypocrisy," said Douglas Muzzio, professor of political science at Baruch College in New York.

Mr Spitzer became governor with nearly 70 percent of the vote in November 2006 on pledges to clean up state politics. But 70 percent of New York voters wanted him to quit, according to a WNBC/Marist poll conducted on Tuesday.

His resignation helped resolve the political paralysis that has gripped the state capital, Albany, over past two days.

Mr Paterson will be New York`s first first black governor and the first legally blind governor in US history.

Amid speculation that he was attempting to reach a plea deal to avoid or reduce any criminal liability, a federal prosecutor said no such pact had been reached.

"There is no agreement between this office and Eliot Spitzer, relating to his resignation or any other matter," Michael Garcia, US Attorney for the Southern District of New York, said.

Mr Garcia`s office is investigating the prostitution service that Mr Spitzer reportedly used.

The Times, citing unnamed law enforcement officials, reported on Monday that Mr Spitzer was the man identified as "Client 9" in a federal affidavit revealing details from the investigation.

Client 9 arranged to meet with "Kristen," a prostitute who charged $US1000 an hour, on February 13 in a Washington hotel and paid her $(US)4300, the court document said.

The complaint unveiled last week charged four people with running a prostitution ring dubbed The Emperors Club.

Although prostitution is illegal in most US states, legal experts said Mr Spitzer was unlikely to face charges as a client but could be legally vulnerable over payment methods.

The Times reported that federal authorities were first alerted to the case by a bank that reported its suspicions about the way Mr Spitzer was transferring money.

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