Not too very long ago, you could look under the hood of your car and see the ground. That's how small and comparatively simple engines were - I think here of the straight-six. Likely as not, you could also spend the day tinkering with the engine, taking it apart, spreading it all over the ground, cleaning and replacing certain parts, and then putting it back together.

That's what's happening to the municipal market right now - its engine is getting tinkered with. Except that the engine is a modern one, filled with all sorts of impossible to figure out electronics. It is far from simple, and once all the parts are taken out and apart, you almost have to wonder, who will be able to put it all together again, and what's the point?

I say you almost have to wonder. Because the point was stated very clearly by Arthur Levitt Jr., when he told us a few weeks ago that he was tired of all of the "game playing" in the municipal market. He said, "As soon as a firm or exchange or an area is compromised in terms of its basic integrity, it becomes a much more expensive place to do business," presumably for both issuers and investors.

Right now, we have the SEC, the NASD, and Lord knows what other agencies, both federal and state, looking into a variety of episodes. In New Jersey, they're looking at why a tiny firm with seemingly little but political connections got money from underwriters. In Louisiana, they're looking at much the same thing. In Massachusetts, they're studying cozy agreements between financial advisers and various underwriters.

No one is saying anything about these investigations now. Those dismantling the engine are, for the time being, just spreading its constituent parts on the ground. Here, campaign contributions and pay for play; there, political consultants; there, lobbyists; and there, negotiated versus competitive.

Some parts are being cleaned; others are receiving a fine coating of grease. Unhappily, a good number of them are being labeled, "Unethical - but not illegal."

The mechanics are receiving a lot of advice right now, as they pick and puzzle over parts. The advice runs from the general to the very specific. Some observers are saying, Make the market go competitive. Others say: Disclosure. Others: It's your own fault. You all made the tax laws so byzantine that we need specialists to set up refunding issues. And others: Regulate relationships in the market. And still others: Reform syndicate practices.

The atmosphere surrounding this market right now is buzzing with all kinds of suggestions on how to put it back together again, and the buzzing is probably a good thing. But make no mistake: The atmosphere surrounding the market is, at present, chilled. Is this market now clean? As a hound's tooth. In essence, the SEC seems to have taken over the role of the Municipal Securities Rulemaking Board. Chairman Levitt, speaking loudly from the bully pulpit, as Theodore Roosevelt called it, has our attention. And all of a sudden, a lot of people in the market are displaying a lot of backbone.

Perhaps, this is what this market has needed all along. As a banker told me last week, as soon as a law is made, people will figure out ways to get around it. He continued, "There's going to be a lot of focus on the MSRB's role in the future. How will it handle complaints and investigative procedures? And if there have been rules, as they say there have, how come they didn't enforce them? The Bond Buyer has been writing about questionable and abusive deals for years. Where was the MSRB?"

This is not the time to stand apart. The smart guys, the really good cobblers, should leave the last for a moment, and make sure this engine is put together right. Toward that end, I invite you all to our January "Review & Outlook" program, subtitled "Ethics in Public Finance." It is, quite purposely, being held in New York, not Washington.

Loose Ends

The editor and publisher has been sandbagged by his 1994 budget for what seems like months now, and consequently has been doing damned little spectating. I have a few odds and ends to clear up before I head for the beach.

1. Don't you endorse candidates?

We have not formally endorsed a candidate, as far as I can reekon, since 1904, when William F.G. Shanks endorsed Theodore Roosevelt and the gold standard. Shanks believed that the Democratic Party was "the greatest curse the nation has known." He went so far as to produce a pamphlet in advance of that election containing "some wholesome truths not generally taught in schools and colleges of the present day," to wit, that Thomas Jefferson was in fact the first Republican president, and that Madison, Monroe, and Adams were also early members of the party of Lincoln. None of Shanks' successors could possibly top his feats.

2. Why haven't you written about the Prudential energy and real estate partnership scandals? ~Is this a conspiracy to withhold information from bond issuers for the purpose of defending your personal friends?'

I received two very interesting letters, one unsigned, the other signed by A CONCERNED READER. Both writers obviously compete with Arthur Spector, who I interviewed in a September column. And both were incensed that I could find a kind word to say about him. The CONCERNED READER was so furious, in fact, that he sent his evidence of my "conspiracy" to editors at both the Wall Street Journal and New York Times, as though editors there somehow have a hotline to this office, and so can call me on the carpet whenever they wish.

All this said, The Bond Buyer covers the municipal market; we do not cover energy and real estate partnerships. Our customers can get that news elsewhere; likewise, sports and news of Haiti, and of Picasso auctions. To the extent we cover dealer news, it is when some torpedo threatens the viability of an entire operation, such as E.F. Hutton's check-kiting settlement.

As far as Arthur Spector, I think it's pretty safe to say that he had no personal involvement with the Prudential sales of oil and gas and real estate partnerships. At the time they were sold, he worked for Goldman, Sachs & Co.

The municipal bond business, I can see, remains very, very competitive.

3. What about those Ohio municipalities who invested in interest-only mortgage-backed securities?

What about them? This is an old story. Once again, investors get burned reaching for yield. What is a getting a little bit tired, however, is the squawking done by the afflicted. You would think that by now, almost 10 years after the explosion of the Lion Capital Group, municipal officials would smarten up and know what are appropriate, and appropriately collateralized, investments.

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