With Bonds in Trouble, States Seek Federal Help

California and other states scrambled on Tuesday to cope with bills coming due as they pressed Washington for assistance because the municipal bond markets remain largely closed to them, The New York Times’s Mary Williams Walsh and Randal C. Archibold reported. In Washington, White House officials said they were talking with state officials and reviewing the issue of aid. But despite the urgency of the problem, thorny legal issues have emerged. Though the federal government has taken extraordinary steps to lend money to corporations in the short-term markets, and to provide more money to banks, officials have been stymied over how to assist local governments because of their status as issuers of tax-exempt bonds. A longstanding provision of the Internal Revenue Code bars the federal government from guaranteeing tax-exempt... [read full story]