WASHINGTON — The Municipal Securities Rulemaking Board issued a media advisory on Tuesday warning of possible problems its anti-pay-to-play rule could cause for governors who are running for president and Wall Street firms that may contribute to their campaigns.
The MSRB's Rule G-37, which was put in place years ago to prevent muni dealers from making political contributions to issuer officials to obtain muni bond business, could cut off most contributions from Wall Street firms and bankers to four sitting governors, handicapping their campaigns. If muni firms or their finance professionals give the governors sizeable contributions, they might have to ban themselves from doing any negotiated bond business with the states for two years.
G-37 bars municipal securities dealers from engaging in negotiated muni business with an issuer for two years if the firm or its municipal finance professionals make significant political contributions to an issuer official who can influence the award of muni business. The rule contains a de minimis exception under which municipal finance professionals are permitted to contribute up to $250 per election to anyone for whom they are legally entitled to vote.
Governors are issuer officials and the four who are running for president appear to be in a position to influence the award of muni bond business in their state, typically by appointing individuals to high level positions or authorities involved in bond issuance and the selection of underwriters.
"With multiple sitting governors on the presidential campaign trail, the MSRB believes it important to remind reporters and others about federal regulations governing political contributions from municipal securities dealers to officials of issuers of municipal securities," MSRB executive director Lynnette Kelly said in a release sent to Business Wire but not posted on the board's website. "Every reporter covering the presidential election should be aware of MSRB Rule G-37."
These governors are already subject to G-37, but the rule takes on more significance as they attempt to collect contributions for their presidential campaigns. The rule effectively handicaps them compared to other presidential candidates who can freely take campaign contributions from Wall Street firms.
Wisconsin Gov. Scott Walker, New Jersey Gov. Chris Christie, Louisiana Gov. Bobby Jindal, and Ohio Gov. John Kasich, all of whom have declared as Republican presidential candidates, appear to have some influence on bond transactions in their states.
Walker appoints the secretary of Wisconsin's Administration Department, which includes the state's capital finance office. He also appoints members of bond issuance authorities such as the Wisconsin Health and Educational Facilities Authority. Christie is responsible for appointing New Jersey's treasurer, which oversees the state's public finance office. He also appoints members of bond issuing authorities such as The Port Authority of New York and New Jersey.
Jindal is a member of the Louisiana State Bond Commission, which selects underwriters for bond transactions. He also sends capital financing plans to the state legislature. Kasich appoints members of bond issuance authorities such as the Ohio Turnpike and Infrastructure Commission.
