WASHINGTON -- It's like seeing the film "Casablanca" for the fifth time.

From the moment Claude Rains delivers the classic line ordering his officers to "Round up the usual suspects," the rest of the plot is predictable.

So, too, was the plot of last week's hearing before the House securities subcommittee on the need for better regulation of the municipal bond market.

Once the pin-striped, Gucci-hoofed municipal crowd was packed into the ornate hearing room, it quickly became clear that none of the hearing participants -- neither regulators nor legislators -- planned any bold moves to clean up the market's tarnished image.

Frankly, it would have been a surprise if they had done more than shake their gloved fists.

Rep. Edward Markey, D-mass., the chairman of the House Energy and Commerce Committee's finance subcommittee, which has jurisdiction over securities, came close to doing more when he announced that there was a "high probability" that his panel would draft legislation to tighten federal regulation of municipals.

But he offered no specifics and later indicated that he would wait "with an arched eyebrow" while giving the Securities and Exchange Commission and the Municipal Securities Rulemaking Board time to try to use their existing powers to come up with some solutions before he took any action.

SEC Chairman Arthur Levitt also came close to surprising the crowd when he said "comprehensive, disclosure ... can only be achieved" if Congress repeals the Tower amendment and requires issuers to register bonds and provide ongoing disclosure of finances.

"Such an approach would be the only meaningful way to ensure comprehensive disclosure both on an initial and continuing basis," Levitt said, adding that at a minimum Congress should require registration of conduit bonds.

But Levitt, who was making one of his first appearances on Capitol Hill since his confirmation last spring, subsequently admitted that "political warfare" would be declared by state and local officials if an attempt were made to take the "unrealistic" step of trying to repeal Tower at this time.

Instead, he said, the SEC and the MSRB should use the "limited, but powerful" tools they currently have available to improve disclosure, price information, sales practices, and-surveillance as well as to control political contributions and influence peddling.

But both Levitt and Markey made it clear they would take the gloves off and push for legislation if the SEC and MSRB are unable to use their existing powers to move quickly to correct what Levitt termed "significant growing problems" in the municipal market.

Now it is up to the regulators and market participants to make the existing regulatory system and proposed new rules work.

That's the plot most observers expected. As the old saying goes, "Seen any good movies lately?"

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