Goldman, Sachs & Co. is asking municipal market executives to support a major change in the voluntary ban on campaign contributions and permit campaign contributions to some state and local officials now covered by the ban.
In a Sept. 19 memo to executives at several Wall Street firms, Goldman said "there is no logical reason" to restrict campaign contributions to officials who play no role in selecting underwriters on municipal bond deals.
Under the voluntary ban, Wall Street executives can make contributions of up to $250 to state and local officials in the districts where the executives are registered to vote. The change, if implemented, would allow municipal executives to contribute any amount to state and local officials not involved in selecting bond underwriters.
The change would be the second major revision of the ban. Originally, no contributions were allowed, but in August the group of Wall Street and regional firms that framed the voluntary agreement decided to allow the $250 gifts.
A Goldman Sachs official, who spoke on condition of anonymity, said the memo was an attempt to make the voluntary ban more closely resemble a new contribution role imposed by the Municipal Securities Rulemaking Board.
The MSRB's rule, known as G-37, prevents municipal firms from doing business in areas where their executives have violated the rule. Municipal executives are allowed to make contributions of up to $250 to state and local officials where the executive is registered to vote.
The MSRB's rule does not cover state and local officials who do not choose municipal bond underwriters, and that's what Goldman seeks with its proposed revision to the voluntary ban.
The memo, circulated by Judah C. Sommer, a vice president and manager of Goldman's government relations office in Washington, D.C., "would amend the political contributions policy to bar otherwise prohibited contributions only to officials of an issuer as defined by Rule G-37."
"The intent of this change is to clarify the voluntary initiative to bring it closer to the spirit of G-37," said the Goldman executive. "The differences in the two measures create anomalies."
Several municipal market executives agreed that a change in the voluntary ban is necessary. The current rules are unfair, they said, because the executives have personal, not business, relationships with those state and local officials who do not select underwriters but are nonetheless covered by the ban.
Other executives, however, say city council members or candidates for lieutenant governor can easily influence the underwriting selection process through their various government contacts.
"Who is to say who can or cannot influence business?" said Mark D. Schwartz, an attorney and former investment banker. "Public officials who can't give business are often good at picking up the phone and finding out who can."
Goldman's Sommer could not be reached for comment. A Goldman official confirmed that the firm supports the change, and rejected charges that the proposal would invite further conflict of interest problems.
"I don't see anyone proposing anything that would go to the heart and guts of the voluntary initiative," the official said.
