SIFMA’s Bentsen Talks Up Munis

WASHINGTON — The Securities Industry and Financial Markets Association is not opposed to legislation that would require the Municipal Securities Rulemaking Board to have a majority of public members, but wants Congress to make sure they have financial expertise and that the MSRB has more time for the transition, the new head of its Washington office said last week.

“We appreciate where the Congress wants to go with that,” said Ken Bentsen, a former Democratic congressman from Texas and muni bond dealer, said in a wide-ranging interview last week.

Bentsen, executive vice president for public policy and advocacy, said SIFMA is pushing for changes in the bill so that the MSRB’s public”members are required to have a level of financial expertise and the switch to a majority-public board would begin in roughly a year when the board begins a new term. Currently the legislation would require the switch to occur six months after enactment.

Bentsen said SIFMA is trying to offer constructive suggestions to the House Financial Services Committee, which is expected to vote today on the bill. The measure was introduced Oct. 1 by Rep. Paul Kanjorski, D-Pa., the chairman of the Financial Services Committee’s capital markets panel.

“I don’t know that it’s really our place to be writing the rules for our regulator, but I think it is our place to be offering suggestions and commentary,” Bentsen said. “You want to have a good board that understands the business that you’re in or the markets that you operate in.”

Currently, 10 of the MSRB’s 15 seats are held by individuals at banks or securities dealers.

Bentsen’s remarks come about a month after he started at SIFMA. He is part of the group’s efforts to ramp up its staff and coverage of the municipal market. A year ago, at the height of the financial crisis, the association laid off at least 30, or 25%, of its employees.

The layoffs also came about two years after SIFMA was formed from a merger between the The Bond Market Association and the Securities Industry Association.

But even though Bentsen said he has his work cut out for him, he says SIFMA is back on much steadier financial ground.

“There’s probably not a trade association in this town that hasn’t been through some downsizing and financial difficulty, and if you’re a financial trade association, even more so,” he said.

Bentsen himself is the second individual to head SIFMA’s Washington office in the past year, after Michael Pease, a Democrat, departed for a job as Goldman, Sachs & Co.’s number two lobbyist here.

But Bentsen said SIFMA remains “a pretty stout organization.”

“We have and will have sufficient staff to address the issues that we have to deal with,” he said.

The group recently hired Carter McDowell, formerly chief legislative counsel at the American Bankers Association, who was chief counsel on the House Financial Services Committee from 2001 to 2007. It’s also “close to” hiring a tax counsel to replace Shahira Knight, who left to join Fidelity Investments as a lobbyist earlier this year, Bentsen said.

SIFMA is also moving to boost staff for its municipal division. About 80 of the group’s 550 members are participants in the muni market.

Association officials would not provide the dollar amount of new-issue fees that it obtains from its muni members, but they generally pay three cents per $1,000 par value of long-term bonds that they underwrite, for both competitive and negotiated deals.  For 2008, total negotiated issuance would have generated $10 million. That figure includes underwriting done by firms that were not SIFMA members, so the actual fees the group raised would be somewhat less.

The trade group recently announced that it had hired Michael Decker to rejoin its staff from the Regional Bond Dealers Association, which Decker helped launch last March. He served as the RBDA’s co-chief executive officer but previously was SIFMA’s head of research.

In his new job, however, the Washington-based Decker will co-chair SIFMA’s muni division with Leslie Norwood, who is based in the New York office.

“This shows tremendous commitment on the part of the leadership of this organization to the muni sector,” Bentsen said. “We think this is a tremendously important market and it deserves excellent coverage and that’s what we’re going to make sure it has.””

He also counts himself as part of the firm’s efforts to boost its muni staff, pointing to his background as a municipal investment banker between 1987 and 1993, prior to serving in Congress, at the muni arm of the former Drexel Burnham Lambert Inc., and George K. Baum & Co.

“At the end of the day, I’m a muni person,” Bentson said. “The world has changed a lot since I was in the business but that’s my area of expertise and so I feel like we’re going to be able to do a lot for that part of the membership.”


Among the muni issues SIFMA is following is legislation introduced earlier this year that would require all financial advisers in the municipal market to register with, and follow professional standards created by, the Securities and Exchange Commission.

SIFMA strongly supports the bill, Bentsen said, and congressional sources have said they expect it to pass the House attached to separate regulatory reform legislation.

“Our position is organizations giving financial advice to issuers should all be treated uniformly. Having unregulated entities giving financial advice [to municipalities] is potentially problematic,” he said.

Many of SIFMA’s members provide both underwriting and financial advisory services, but stressed that they cannot underwrite a deal while simultaneously serving as an issuer’s FA.

“That model has worked pretty well,” Bentsen said. “As finance gets more efficient but more complex, it’s beneficial to have that regulatory oversight.”

SIFMA does not have a defined position on the provisions in two derivatives bills pending in the House that would require states and localities that want to be “eligible contract participants” in over-the-counter derivative deals to have either $50 million in discretionary investments or a regulated entity as a counterparty.

Bentsen said SIFMA is still studying the muni-related provisions in the bills. The two bills would bring derivatives under the government’s regulatory umbrella for the first time, and require the Commodity Futures Trading Commission and the SEC to share regulatory responsibility for them.

Though SIFMA generally supports reform of the OTC derivatives market, it has raised concerns about an amendment to the bill passed by the House Financial Services Committee earlier this month requiring a clearable derivative between financial institutions to be traded over a transparent exchange or electronic platform. As initially drafted, the legislation would have given financial institutions the option of trading their derivatives on exchanges or complying with CFTC recordkeeping and daily reporting requirements.

“Mandating particular transaction modes, as this bill does, could raise transaction costs while not necessarily reducing risk in a commensurate amount — results that we believe are contrary to our shared reform goals,””Bentsen said.

“As the legislative process continues we look forward to working with the Congress toward a bill that strikes a balance between the need for transparency and risk-management efficiency,” he said when the committee passed the bill Oct. 16.

Asked about the revenue affects of permanently exempting all private-activity bonds from the alternative minimum tax — as groups representing student-loan bond issuers, port authorities, and airports are seeking —  Bentsen said he is “sure we would be in favor of that.”

His comment comes after Congress permanently exempted all housing bonds, which are PABs, from the AMT in the Housing and Economic Recovery Act of 2008. It also exempted all bonds issued during 2009 and 2010 from the AMT under the stimulus law enacted earlier this year.

“It’s always been interesting to me that there’s been this differentiation, that you would apply the AMT to some bonds, some private activates, and some nonprofits and then not to general purpose,””Bentsen said. “I think doing what they did before is the right step, but I think when they get to the extension we might be in a bigger debate on the AMT.”


Bentsen brings broad experience to SIFMA as a former muni dealer for both national and regional firms, U.S. congressman, consultant, and trade association executive.

He comes from a politically connected Texas family — his uncle, the late Lloyd Bentsen, served as a U.S. senator from 1971 until 1993, was Treasury secretary during the early years of the administration of President Bill Clinton, and was the  running mate of Massachusetts’Gov. Michael Dukakis when he ran for president in 1988.

Bentsen’s own political career began in a 1990, after he lost his job with Drexel when the firm shut down, and he ran for Democratic party chairman of Harris County. He won easily.

When Bentsen’s uncle was nominated as Treasury secretary in 1994, more than 20 Democrats, including Rep. Michael Andrews, then Ken Bentsen’s congressman, vied to replace him. Bentsen saw an opportunity and ran for and won Andrew’s congressional seat.

“I’d always wanted to be in Congress,” he said.

While in the House, Bentsen served on what was then called the Banking and Financial Services Committee, chaired by former Rep. Jim Leach, R-Iowa. There he was involved in the Gramm-Leach-Bliley Act, which ultimately passed in 1999, removing longstanding barriers that prevented banks, securities firms and insurance companies from consolidating, as well as the Commodity Futures Modernization Act of 2000 and the Sarbanes-Oxley Act of 2002, among other bills.

Although financial services issues did not have a lot of “constituent value” for him — the primary businesses in his district were in the health care and petrochemicals sectors — they were a good fit with his financial background.

Bentsen left the House in 2002 after he failed to win his party’s nomination for the Senate seat vacated by then-Senate Banking Committee chairman Phil Gramm, a Republican who’had stepped down after three terms.

Declining offers to return to investment banking, Bentsen instead joined the consulting firm Public Strategies Inc., where his work included advising the big four accounting firms. He left in 2006 and joined the group now called the Equipment Leasing and Finance Association, which represents financial services companies and manufacturers in the $650 billion U.S. equipment finance sector.

During the summer SIFMA president and CEO Tim Ryan asked Bentsen to lunch and suggested he join the group. After thinking about it, Bentsen felt it was too good an offer to turn down.

“To come to work for an organization that I had strong professional ties to from my days as a muni banker and then my days as a member of Congress working on legislation directly related to this industry, and to be able to do so at a time when we’re going to go through arguably the largest restructuring of the regulatory regime certainly since Gramm-Leach-Bliley in 1999 — which I was involved in — and more likely even greater than that, I thought ... it’s just too interesting to pass up,” he said.

Bentsen said he finds public policy work highly appealing and that at SIFMA, while “I’m not on the deal side I’m close to it, and I’m on the public policy side as well, so I get the best of both worlds.”

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