The immediate, under-the-radar problem for the municipal bond market is that borrowers relied on banks to backstop their credits and lower short term funding costs when the credit crisis shut the door on auction rate preferred financing.
To help relieve the pressures in the interbank markets, the Federal Reserve among other actions recently introduced a termauction facility (TAF), through which prespecified amounts of discount window credit can be auctioned to eligible borrowers, and we have been working closely and cooperatively with other central banks to address market strains that could hamper the achievement of our broader economic objectives.