The contest over pay-to-play is approaching a decisive summer.
William Blount, the Alabama politician who is leading the legal attack on the Municipal Securities Rulemaking Board's Rule G-37, has filed his brief in court, and his arguments are strong. Blount contends that federal securities regulators have no right to control state political campaign activities.
On July 1, the Securities and Exchange Commission will file its brief in the Blount case, and the MSRB will follow on July 18. Blount is scheduled to file his response on Aug. 1. The summer showdown approaches.
Meanwhile, in the netherworld of local political maneuvering, officeholders engage in furtive attempts to circumvent the new rule, which went into effect on April 25.
It is not possible to know how extensive this activity is, but it is definitely happening, as our staff reporter Karen Pierog and her colleagues reported last week.
In one case, a securities firm asked a Midwest bond lawyer to pad his bill and contribute the excess to a politician. A blatant violation of G-37, but who's to know?
As another bond lawyer put it, public officials are not going to drop their never-ending quest for money "because of some goofy MSRB rule." That is a flippant description for a serious attempt to right a serious wrong in municipal finance.
SEC Commissioner Richard Roberts, who has led the effort to end pay-to-play, has warned municipal bond firms not to attempt to circumvent G-37 by an "shenanigans."
But Roberts is a realist who also says he has "always assumed certain segments of the securities industry would attempt to devise methods to circumvent the rule."
For the long-term integrity of the municipal bond market, G-37 must stand. Regulators will have to keep up a never-ending effort to root out attempts to get around the rule.