WASHINGTON - Market participants are continuing to push for a federal backstop for the roughly $500 billion variable-rate demand obligation market, warning that the availability of already-scarce bank liquidity facilities will continue to decline if issuers experience downgrades to their credit ratings in the coming months.

"In this environment, it's hard to predict where we're going to be a year from now, but if the current trend continues, there's going to be even less capacity for issuers to obtain [bank letters of credit], which is going to be very negative for municipal issuers," Michael Decker, co-chief executive officer of the Regional Bond Dealers Association, said yesterday after speaking to state treasurers.

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