CHICAGO - In the first deal of its kind, a Federal Home Loan Bank recently provided a letter of credit for a tax-exempt health care bond issue that participants said offers an attractive option for smaller issuers struggling to secure credit enhancement in the current market.

The transaction was made possible by the new authority Congress granted the banks last summer under the massive Housing and Economic Recovery Act of 2008. FHLBs previously could only provide letters of credit for tax-exempt or taxable housing deals.

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