As time marches on, Sam Shapiro's proposal makes more and more sense.
Sam, Maine's treasurer, said on May 13 that he planned to ask the Municipal Securities Rulemaking Board to ban campaign contributions from municipal bond firms. Campaign gifts have been much in the news market lately.
Last Wednesday, the board announced it is considering requiring bond dealers to make "additional disclosures" of political contributions, and that it will review the issue for several months.
Also on Wednesday, Richard Roberts of the Securities and Exchange Commission talked about political contributions at a congressional hearing, asserting that the SEC and the MSRB had the authority to require some disclosure of Wall Street donations to government officials.
The Public Securities Association, reacting to the MSRB, urged the board to explore how to improve mandatory disclosure of political contributions. The options seem to be prohibition or disclosure. Sam Shapiro wants prohibition; the PSA wants disclosure.
Back in 1975, Congress enacted the so-called Tower amendment, which limits the SEC's authority to tell governments what they must disclose when they offer securities for sale to the public.
In 1993, it's hard to see what good Tower does, for if states and cities want to borrow in the interstate securities market, they can adhere to national marketplace rules. If Congress can tax the interest on municipal bonds, Congress -- read the SEC and thus the MSRB -- can tell muni bond issuers what they must disclose.
So far, the MSRB has been unnecessarily timid in these matters. Its policy, written in 1991, states, "In the municipal securities market, the payment of political contributions by an underwriter -- or any other party connected with the underwriting process -- to officials involved in the choice of an underwriting team may create at least the appearance that the contribution has influenced the selection of that team." The MSRB is kidding itself here. Contributions always appear to influence the selection of underwriters.
The MSRB policy encourages dealers and issuers "to maintain the integrity of the process of selecting the parties involved in an underwriting." This policy hasn't kept questionable back-scratching from recurring and embarrassing and weakening the municipal bond community, and the MSRB is wise to move ahead.
Sam Shapiro would go further. He says he will propose a nationwide ban on Wall Street contributions to bond-issuing officials at a regional meeting of state treasurers in June. There are free speech questions, to be sure, but the proposal has a good, clean ring. Even if contributions are legal and disclosed, they are still payola.
