Clarification

Yesterday's front-page story about credit problems affecting the short-term market included two points that require clarification. Liquidity providers cannot walk away from their obligations to buy bonds back from an investor unless a tender-option termination event occurs, typically a downgrade of the bonds to below investment grade rather than to double-A. In addition, in auction-rate security auctions, banks are not the liquidity providers but have the option to backstop deals.