WASHINGTON - The downward financial spiral of Fannie Mae and Freddie Mac Friday led economists and financial experts to warn about possible dire consequences for the U.S. economy. However, housing analysts said the two secondary mortgage market titans had their greatest impact on the muni market beginning two years ago when they either halted or severely reduced their purchases of muni housing bonds after being the biggest buyers in the market. Click to see the Fed and Treasury statements.

The resulting lack of demand pushed housing bond interest rates up from five to 25 basis points, according to John Craford, executive vice president of finance and administration for the Connecticut Housing Finance Authority in Rocky Hill, Conn.

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