Muni board wants "into the ballgame" of credit crisis

WASHINGTON, Oct 27 (Reuters) - The major oversight board for the U.S. municipal bond market wants to be included in the federal government's credit crisis responses after being left out of most of the major economic rescue efforts, the board's chair said on Monday.

"The municipal market has suffered tremendous liquidity problems," said Municipal Securities Rulemaking Board chairman Ronald Stack in a conference call with reporters, adding that the MSRB contacted the federal government about using funds from a recent rescue bill to help state and local governments.

"It's an ongoing process. We hope to have something soon. I think, in all seriousness, you read in the paper every single day, this is an extraordinarily rapid moving ... program. The first thing we wanted to do is get into the ballgame," he said.

The board, a quasi-governmental agency of market participants that writes regulations that are enforced by the U.S. Securities and Exchange Commission, has sent the Treasury Department and Federal Reserve Bank of New York letters about the state of the market and to make clear "who we were," Stack said.

It is also having conversations with federal officials but has yet to make any specific proposals on how to help a market that was frozen for nearly two months, pushing yields to punishing highs for issuers.

The MSRB has not added any staff to formulate solutions or hired a lobbyist, he said. Instead, it will present policy-makers with information about market events and a list of potential policy actions, turning the board into a "collector of options."

He noted that when the Treasury Department announced it would insure money market funds, it did not initially include tax-exempt funds because it did not understand the difference between insuring the funds and guaranteeing the underlying securities.

Had the department been deeply involved in the $2.6 trillion muni market, it would have understood the distinction and tax-exempt money markets would not have experienced a massive sell-off in September, Stack said. Later, the Treasury decided to include tax-exempt funds.

At the same time, states and municipalities have begun raising concerns that the recently enacted $700 billion financial bailout bill did not include any help for them. The federal government, though, may include bond insurance as part of its rescue plan and the language of the act leaves the aid open for any distressed securities.

In the hopes of finding other ways to "unclog" the market, the MSRB said it was following through on its assorted programs to increase transparency about trades and new issues, and is still planning to launch its disclosure system for short-term securities in the first quarter of 2009.

Because the municipal bond markets have been changing swiftly, the board will also make a comprehensive review of its rules governing the market to make sure they address current events, Stack said. (Reporting by Lisa Lambert, Editing by Toni Reinhold)