SAN FRANCISCO — The Federal Home Loan Bank of San Francisco has provided $167 million in letters of credit for non-housing tax-exempt bonds since legislation authorized the transactions last year.

The triple-A rated nonprofit bank cooperative has another $110 million of deals in the pipeline through its member institutions, including the rebuilding of a trauma center, a nonprofit research facility, and the expansion of manufacturing facilities.

Home loan banks, formed by Congress in 1932 to provide liquidity to the housing market, were authorized to provide letters of credit to the non-housing municipal bonds by the Housing and Economic Recovery Act of 2008.

"The downgrading of bond insurers in the wake of the financial crisis left a significant void in financing for critical infrastructure and other valuable projects," said Stephen P. Traynor, the bank's senior vice president for financial services and community investment.

The total amount of the San Francisco FHLB letters of credit is small compared to some of the massive variable-rate bond deals that have gone begging for credit enhancement since the credit crunch began.

However, the bank has given access to high-grade credit enhancement to 13 smaller issuers that would have struggled to find LOCs in a market where supply remains scarce.

The San Francisco bank is rated AAA by Standard & Poor's and Aaa by Moody's Investors Service.

A spokeswoman said the bank can continue to write new letters of credit through the end of 2010 and is looking for deals that support economic development and job creation. The bank provides backup enhancement for LOCs issued by member banks in Arizona, California, and Nevada.

For instance, it issued a standby letter of credit to back up the Pacific Capital Bank LOC that enhanced $6.5 million of variable-rate demand obligations issued by the Bay Institute through the California Economic Infrastructure and Economic Development Bank in May.

The debt financed the acquisition of the Aquarium of the Bay in San Francisco. The Bay Institute has converted the failing for-profit tourist attraction into a nonprofit marine nature and education center that promotes conservation of the San Francisco Bay and surrounding waters.

With the FHLB's backing, the little nonprofit's weekly VRDOs have been resetting with rates of 0.18% to 0.23% over the past month, according to data from the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system.

The San Francisco bank has also enhanced industrial development projects in Los Angeles and Indio, as well as nonprofit projects along California's central coast.

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