Fox Business reports the House Financial Services will entertain bills to guarantee state and municipal debt in a really big way:

This latest intervention would:

• Create a liquidity facility through the Federal Reserve to purchase municipal bonds, much like what the Federal Reserve does with mortgage-backed and federal government bonds.
• Form a temporary federal government program to reinsure municipal bond insurers.  Almost all municipalities buy bond insurance because it boosts their credit ratings.  The cost of the insurance is usually lower than the higher interest payments that come with a lower credit rating.  If the insurer runs into financial trouble, then the credit ratings on the municipal bonds drop because there is doubt about the insurance.  Government backing would eliminate that concern.
• Provide additional regulation for financial advisors to municipalities.  Many, including former Securities and Exchange Commission Chairman Arthur Levitt, have been calling for stronger oversight of the municipal bond market in the wake of pay-to-play bond scandals, in which banks and advisers have made gifts or political contributions, and received financing jobs along with the fees for those jobs.

House Financial Services Committee Chairman Barney Frank (D-Mass.) is leading the effort and has long touted his investments in municipal bonds that finance public projects as a civic duty.

That will likely seal Federal control of the states for good…so much for the 10th amendment…swept away under the “crisis” umbrella.  See also this post at Clusterstock.