THE LATEST EPISODE in the fight to close the "soft money" loophole is the lawsuit filed in federal court the other day by Common Cause against the Federal Election Commission. "Soft money" is a contribution illegal under federal law but allowed by state law: examples include money given by corporations and unions and individual contributions over the federal limit of $1,000 per candidate. Fund-raisers for both Democrats and Republicans have admitted that they have been raising millions in soft money out of their national headquarters and disbursing the money to states where it's legal. But this money, though centrally raised and centrally disbursed, is not centrally reported.

That violates the first principle of the federal campaign finance laws: the flow of money in politics should be disclosed. Big contributors, corporations and unions can now give the national parties contributions of $100,000 or even $1 million and get credit for it with the politicians -- and leave the public in the dark. Dribbles of the money may be disclosed in some state capitals. But that's not an effective substitute for federal disclosure.

Yet a 4-to-2 majority on the Federal Election Commission, after delaying for more than a year in responding to a Common Cause complaint, rejected even the modest changes in current regulations recommended by the agency's own general counsel. The commission refused to recognize that there is a problem, and airily dismissed the admissions of the national party's own custodians of soft money as anecdotal evidence. That is the decision Common Cause is now challenging in court. We leave to others the technical question of whether the court can review the FEC decision. The FEC, in our view, should take a second look at soft money and reverse its earlier decision.

Congress can also do something about the soft money loophole. A demand for revising the campaign finance laws has been percolating. If Congress actually does something about them, it ought to remember one very simple thing about soft money. Funds that are centrally collected and centrally disbursed should be centrally disclose.