Michael Lissack relationship between bond firms and elected officials has led to criminal investigations. In most cases, though, the favorable treatment municipal bond dealers have bought with their campaign dollars has fallen into a gray area just beyond the reach of the law. By 1994, the Securities and Exchange Commission moved to clean up a corrupt system so pervasive that most firms had come to consider cam- paign payoffs “just another cost of doing business,” according to then SEC Commissioner J. Carter Beese Jr. The action came because of “increasing concern about the opportunity for abuses and the perception of problems associated with political contributions in connection with the awarding of business,” according to the Public Securities Association, which represents municipal bond dealers. Specifically, the SEC approved rule G-37. It pro- hibits bond dealers from doing business with state and local governments for two years if the firm or its associates have made campaign contributions to elected officials of those governments. The prohibition doesn’t apply to lobbyists, attorneys or consultants, but does prohibit routing campaign contributions through those types of individuals. Yet the widespread use of political consultants points to a big end run. A spokesman for one banking firm proposed a fascinating standard. Consultants should not be hired if that would subject the firm to embarrassment if exposed in the national media. Now there’s a deep thinking litmus test devoid of public policy concerns. And one wonders why people don’t have more faith in the self-regulatory process. Pitiable howls of complaint arose from the elected officials who have gotten used to stuffing the bond industry’s campaign cash in their pockets. Although the selfishness of their actions was self-evident, these officials lamely asserted that they were only looking out for bond dealers’ consti- tutional rights. Instead, the rules are aimed at eliminating the big piles of money accumulated by bond firms with the express purpose of gaining an institutional advantage with elected officials. Some elected officials may suffer from the loss of this cash cow, but the public - which had been subsi- dizing this “cost of doing business” - will reap the benefits. Hypothetically speaking, what would a candidate be promising in return for a contribution?
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