Advocates of legislation to allow the 12 Federal Home Loan Banks to provide credit enhancement to small tax-exempt bond issuers contend it has the best chance of passage in years because of the tumult municipal bond insurers are facing due to the subprime mortgage crisis.

While big financial guarantors historically have shied away from backing smaller borrowers, the financial losses they have suffered due to the subprime crisis has made them even less able to insure small issuers, they said.

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