A federal official and market participants yesterday butted heads over whether direct-pay Build America Bond issuers should worry about Congress stopping or reducing the federal payments that are to be made to them, despite repeated statements by tax experts in Congress and the administration that such worries are baseless.

The financing tool, which was created under the stimulus law, allows municipal issuers to sell taxable debt in 2009 and 2010, and elect either to receive a direct payment from the federal government equal to 35% of their interest costs or have the government provide a tax credit to investors who buy the debt.

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