Anyone who went to Catholic grammar school will remember the nuns, the Sisters of St. Disciplinaria, who, when they caught some culprits talking in class, would smack the offenders' skulls together, saying with ill-disguised triumphant glee, "It takes two to tango, and two to talk!"
This is an important lesson to remember, and it would do well for all those experts who are setting about with hammer and tongs to repair the image of the municipal bond market to remember it.
Right now, a lot of politicians and more than a few journalists are making hay about the evil bankers do with their campaign contributions and their negotiated bond sales. The fact that almost all of the more than 10,000 bond sales that take place each year come off without a hitch, and without a trace of foul play, is not considered. instead, we are being treated weekly, it seems, to a new story of skullduggery. Most of the time, the story takes the form of the obvious stated in terms of the scandalous. Once in a while, a bad apple, usually an abusive bond deal, actually bobs to the top of the tub. one result of the New Jersey Bond Scandal of 1993 will be - not much, I have decided. When all the investigations are concluded, I wager that what the government prosecutors will say is that a lot of money changed hands, and most of it in an entirely legal manner. As far as the view from Mount Olympus goes, it may have been unethical but it was almost certainly legal.
If we, as a society, or those of us who are in charge of the public morals, then decide that what smells pretty bad ought not to be done at all, we will then say: "Stop doing that." And in order for our words to have any effect, we will then ask that new laws be written and new lawmen hired to make sure the laws are followed.
Lately, there has been more than a little scrambling to try and put a stop to campaign contributions from bond underwriters. The Municipal Securities Rulemaking Board is looking into it, and last week we reported that a couple of the big dogs in the industry were meeting with some other big dogs to settle it among themselves.
The Days of Yore
For a moment, this so-called voluntary approach brought to mind the days of J.P. Morgan, when, according to legend, a few powerful bankers could put the right amount of pressures on their peers, and everyone would do the right thing.
If anyone ever really believe in the Morgan legend, they were probably disabused of its obtaining in modern times when the Washington Public Power Supply System defaulted on more than $2 billion in debt, because the states courts ruled that the participants to the deal never really had the power to get into hock.
A few stout fellows thundered that the National Guard should be sent to the state to punish those who would repudiate their debt, staters should be made to burn their lights 24 hours a day until they did need the WPPSS power plants.
A bold analyst or two said that WPPSS marked the death in our time of the morality of contracts. An underwriter said the WPPSS issuers should, henceforth and forever, be barred from ever tapping the market again.
What really happened with WPPSS was that greed took precedence, as it will do. The "penalty" on those issuers associated, however intimately, with WPPSS was, oh, about 25 basis points, which quickly narrowed to 10 basis points.
Now consider the big dogs who went, so to speak, from house to house, seeking an end to political gift-giving in the municipal bond market. More than one observer said with cynical relish that this "gentlemen's agreement" would remain in place only until Possum Trot Municipal Securities out of Ferriday, La., got the lead manager's slot in a big syndicate. Then, they said, we would see just how fast large checks could be written.
So much for the cynics. As I said above, the arguments the market faces now amount to: This may be legal, but it seems unethical. And before this business is "cleaned up," it's bound to get just a little bit messier. Therefore, I propose, in the spirit of Sister Owen Catherine drilling into my skull It takes two to tango:
The Fairest of Them All
That's right. The Fairest of Then All contest, and I ask the participation of all underwriters, traders, salesmen. bankers, bond counsel, financial advisers, and honest Pols. You can write to me here at The Bond Buyer, or you can call me at your name.
What I am looking for, in short and in sum, are The Fairest of Them All: those politicians who have some say in the choice of firms that underwrite bond issues in their territories - and who are also the ones who ask for the most money.
You know these boys and girls. You get four or five, or more, invitations to their $500-a-plate dinners each year. Hell, even I get them because my name is on the mailing lists of registrants at various municipal officials' annual meetings and the like.
But that's not all. I don't want those politicians who in the line of duty make calls on their Wall Street contacts and ask for a few dollars. I don't want minor transgressors, or cocktail weenies. I want the big dogs. I want the stars, the grandees, the real swells, the same people who put the gun to the head, get on the line, and otherwise make nuisances of themselves to collect money, real money, or what was once called Money That Buys Things, to keep themselves in office. I want the pols who all but conduct themselves and their business with a gun and a mask.
I want names, I want dates, and I want anecdotes. I'll check the facts, and contact the lucky winners. What I am asking for is a softball team's worth: nine regular position players and a short-fielder. The prize will be a nice mention in these columns, and a champagne dinner at Harry's at Hanover Square. Plenty of bankers will be in attendance there, and more than likely they will prove soft touches.
Why a contest? Because it's not a chicken-and-egg question. The politicking came first - not the banking. For years the municipal market hummed along, and the giving of campaign contributions wasn't part of the game. Now, not a week goes by that we don't hear about the evils of bankers. But it takes two to tango.