Statistics on letter-of-credit issuance to municipalities last year indicate the municipal credit market is in dire trouble. But the statistics only tell part of the story.

According to the numbers, banks wrote just $11.79 billion of letters of credit guaranteeing municipal debt in 2010. The last time banks wrote so few LOCs was 1999. The latest figure represents a 49% drop from 2009 and an 84% plunge from 2008, according to Thomson Reuters.

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