The Bond Buyer wrote "Liquidity Fears May Be Overblown" recently, saying, "Climbing the wall of expiring bank guarantees on municipal debt in the coming months may not turn out to be as daunting as anticipated. One propellant of the current hysteria over municipal credit is fear among market participants about the nearly $100 billion of letters of credit and other bank liquidity facilities on state and local government debt set to expire this year. With the banking sector smaller, less leveraged, pickier about risk, and facing more stringent regulations on how it allocates capital, issuers especially are worried about their ability to renew these facilities, which many flocked to after the collapse of the market for auction-rate securities in 2008. The impending wave of expirations was the subject of a recent front-page story in the Wall Street Journal and has been fodder for panels at several conferences.... As the biggest cluster of expirations nears, it is beginning to appear that banks in fact have the capacity to extend credit to most of the governments that need it. Moreover, governments with investment-grade ratings that are unable to obtain extensions from their banks are enjoying improved access to a bond market with interest rates that are still low, and several alternatives to bank financing have begun to take off." The piece quotes Rich Raffetto, head of government banking at U.S. Bank, "There's plenty of issuers out there that are looking for liquidity facilities and are finding them. We have capacity, and we have intent to continue to play a role."
