Downgrades and larger troubles at Bear, Stearns & Co. call into question the creditworthiness of the bank as a swap counterparty for municipal issuers, as well as its ability to continue as one of the top10 most active underwriters in the market.

The corporate rating of Bear Stearns was downgraded by two of the three rating agencies Friday, after liquidity concerns drove the investment bank to secure emergency funding from JPMorgan and the Federal Reserve Bank of New York.

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