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In Focus: In Market For Small Bonds, Role For FHLBs?

Article Excerpt
WASHINGTON -- As the subprime mortgage crisis threatens monoline bond insurers, Bob Donovan's job is getting harder, and he hopes the Federal Home Loan banks can help.

The executive director of the Rhode Island Health and Educational Building Corp. is far removed from homeowners struggling to avoid foreclosure. But their problems are still pinching the state-run agency's ability to help companies access the capital markets to finance hospital additions or schools.

The situation is renewing interest in legislation that would let the Home Loan banks help community banks guarantee bonds funding local projects.

"It's critical this legislation gets passed to allow us to bring more banks into the fold," Mr. Donovan said. "The avenue that we would have normally followed to get a credit enhancement is sort of being cut off."

Typically, a company managing a project would get a letter of credit from one of the nation's largest banking companies, which would pay its debt in the event of a default. That...

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