Phone Call Signals Fed Treading Cautiously With Muni Lending

On April 10, a day after the Federal Reserve rolled out plans to make loans in the $3.9 trillion municipal-debt market for the first time, the central bank’s Kent Hiteshew led a conference call with state and local government officials to explain how it would work.

The takeaway, according to those on the call, was that the $500 billion of loans available to the states and the biggest cities and counties should be seen as a lifeline that’s available if the public markets seize up -- not a first resort for governments desperate for cash to fill the growing shortfalls ...