WASHINGTON -- The Municipal Securities Rulemaking Board took the easy way out when it adopted its position on political contributions.

Rather than dealing forcefully with the controversial issue, the MSRB simply cautioned underwriters that making political gifts to officials who help choose an underwriting team may create the appearance of undue influence.

That stance is little more than a cop-out. It simply tells the municipal bond industry what it already knows -- it shouldn't bribe politicians to get underwriting business.

While it is worthwhile to remind dealers they should be ethical, the board's action certainly does nothing substantive to deter or prevent either perceived or actual conflicts of interest over contributions.

Worse yet, it practically guarantees that the use of political contributions to influence deals will continue to be a way of life in the market.

The MSRB's position is particularly disappointing because there were indications that the board, at the very least, might develop some voluntary system for underwriters to disclose contributions to issuers.

MSRB Chairman David Hartley last November told a group of municipal analysts that political contributions "are a fact of life," but "should be disclosed."

Last week, however, Mr. Hartley, the managing partner of San Francisco-based Stone & Youngberg, said the MSRB was not in a position to do much short of preempting state and federal laws. He argued that the board's statement "is the result of our considered best judgment."

While it might be unconstitutional for the MSRB to ban underwriters or their employees from making political contributions to issuers, the board clearly has the authority both to set up voluntary procedures for underwriters to follow to disclose campaign gifts or to write a rule actually requiring them to disclose all such contributions.

Some argue that it would be unfair to set up voluntary or mandatory standards for dealers when the MSRB has no control over other participants in deals -- such as bond counsel, trustees, and financial advisers -- who also make political contributions.

But those detractors have forgotten that the MSRB's leadership in setting up an electronic disclosure library triggered significant new efforts by other participants in public finance to improve disclosure.

If the MSRB would exhibit the same courage by calling for disclosure of political contributions, surely other participants in the industry would follow.

The MSRB has missed a chance to set a standard that would provide the sunshine needed to protect the market's integrity.

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