WASHINGTON -- The best thing about leadership is it's contagious. When one person or organization rises to a challenge, others usually follow.

First, the new chairman of the Securities and Exchange Commission, Arthur Levitt, dived into the controversy surrounding the municipal market. Levitt worked behind the scenes to set up a meeting next Monday with municipal bond executives on a voluntary effort to control or to eliminate contributions to politicians who select underwriters for negotiated deals.

Then Levitt continued to lead by setting up a meeting this Wednesday with the Municipal Securities Rulemaking Board and industry groups to begin developing a list of the minimum items of ongoing disclosure that all issuers should have to reveal.

Normally, the next development could be expected to come after the two meetings were held.

But last week, Levitt's leadership triggered an important reaction.

Instead of waiting for the meeting on political contributions, the Public Securities Association charged ahead and took the progressive step of calling on member firms to voluntarily ban all political contributions to state and local officials in jurisdictions where they expect to do business.

The trade group said the moratorium should remain in effect until a rule governing contributions is adopted so that regulators do not take action against dealers for violating securities laws by making "pay-to-play" payments.

The PSA's recommendation prompted many of the top firms as well as a group of regional bond houses to announce they would heed the PSA's call and impose a temporary ban on contributions.

That's a move that should be applauded. It sends a message to Congress and regulators that many dealers appear to want to clean up the image that some get their business by bribing state and local officials who decide what underwriters to employ.

But the PSA's efforts by themselves are not enough.

The group's action should spark the other major players in the bond Industry to take similar action.

Other market participants that supply services to issuers, such as bond lawyers. financial advisers, engineers, consultants, and accountants, should adopt a similar moratorium.

Even more importantly, groups representing issuers, such as the Government Finance Officers Association and the National Association of State Treasurers, should make a corresponding move and ask state and local officials who are responsible for bond deals not to accept contributions for the time being.

California Treasurer Kathleen Brown showed the kind of leadership that is needed when she announced last week that she has expanded her ban on accepting contributions from bond underwriters to include bond attorneys. financial advisers, consultants, and accountants as well.

All participants in the market should follow the excellent example Levitt, Brown, and the PSA have set.

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