WASHINGTON - The Treasury Department must take the place of American International Group Inc. as guarantor of transit agency sale-leaseback deals to avoid "financial disaster" for state and local governments, a group of lawmakers warned Treasury and Federal Reserve officials yesterday.

"The consequences of inaction and an adverse decision could trigger banks to demand technical defaults on some 31 other public transportation authorities serving virtually every major metropolitan area in the United States, which would severely hamper the ability for transit properties to access credit markets," House Majority Leader Steny Hoyer and six other lawmakers from Maryland, Virginia, and the District of Columbia said in a letter sent to Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke.

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