WASHINGTON -- Two small, but long overdue, first steps were taken last week in what is likely to be a long march through the minefields of the regulatory system that is needed to maintain public confidence in the municipal bond market.

The Municipal Securities Rulemaking Board, under pressure from the Securities and Exchange Commission and Congress to do more than hold meetings at posh watering holes, finally took notice of the widening investigations into possible political influence peddling involving bond deals in New Jersey and New York City.

The board inched forward with a brief statement that over the next few months it will consider whether to require municipal securities dealers to disclose political contributions they make to state and local officials before underwriting a bond issue.

The MSRB's awakening came as the SEC's Richard Roberts told a congressional subcommittee that if disclosure does not continue improving in the secondary market for municipal securities, he would want to discuss a limited repeal of the so-called Tower amendment that protects issuers from being told what to disclose.

The MSRB's move to consider mandated disclosure of political contributions made by underwriters is a welcome turnaround from the cop-out of nearly two years ago when the board refused to take a stand on the issue and told the bond industry what it already knows -- it shouldn't bribe politicians to get underwriting business.

At least, the MSRB should require underwriters to disclose to investors and the public any political donations made to state and local officials that may influence selection underwriter selection.

Political contributions have always been a problem in the municipal market, especially because many politicians constantly have their hands out and many underwriters don't feel they can say "no" without risking losing business. That's why disclosure, which should serve to temper both the appearance of impropriety and the actual excesses that often accompany political gifts, should not stop with underwriters.

As the PSA wisely said last week, disclosure should extend to other market participants not regulated by the MSRB, like financial advisers, bond and underwriters' counsel, and credit enhancers.

While the PSA diplomatically stopped short of saying that issuers should be made to disclose contributions from underwriters, such a requirement is a crucial part of the equation.

The need for disclosure by any market participant who gave or received campaign gifts is a key reason why it is time to roll back the Tower amendment.

If that were done, issuers should be required to list in their official statements any political contributions received from any market participant who is vying for an issuer's bond business. That's the least that should be done to protect the market's integrity.

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