A bipartisan group of U.S. lawmakers has introduced legislation that would require federal regulators to allow banks to include muni bonds as liquid assets, an issue that cities and states say could increase their borrowing costs, Reuters reported yesterday. In September, U.S. regulators tightened rules on which assets banks can sell in the event of a credit crunch. They also excluded debt issued by U.S. states and cities from banks' high-quality liquid assets. Since then, many municipalities lobbied against the decision, arguing that if municipal debt is no longer considered a high-liquid asset, banks will have less incentive to buy their bonds, hiking borrowing costs. On Friday, a group of five Republicans and five Democrats on the House Financial Services Committee introduced a bill that would require regulators to treat munis that are investment grade, liquid and readily marketable as a "2A" high-liquid asset.
