As liquidity for municipal issuers remains scarce in the short-term market, a regional broker-dealer group and an organization representing nonprofit student loan lenders are urging the Treasury Department to provide standby liquidity facilities for issuers still trying to convert from auction-rate securities to variable-rate demand obligations.

In a five-page letter sent to the Treasury yesterday, the Regional Bond Dealers Association and the Education Finance Council said the department should consider providing a liquidity backstop for VRDOs under the new authority to purchase or commit to purchase "troubled assets" that Congress gave it in the recently enacted bailout legislation. Alternatively, it could use authority in the legislation allowing it to guarantee troubled assets issued prior to March 14, the letter said.

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