WASHINGTON - Municipal market participants are concerned about the so-called taxable bond option programs proposed in the economic stimulus packages pending in the House and Senate, questioning how effective they would be and even worrying that they could ultimately undermine the tax-exempt bond market.

Dubbed Build America Bonds in the Senate bill and the tax-credit bond option for state and local governments in the House bill, the proposed programs would allow muni issuers to sell taxable debt in 2009 and 2010 in exchange for a cash subsidy from the federal government. For taxable bonds issued after that, the government would provide investors with a 35% tax credit.

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