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What I've found makes me think the US Gov does not back the bonds, only the municipalities, but I wonder if their is a de-facto backing due to the fact it's part of the stimulus and government-sponsored...perhaps that backing is only short-term, though...

BABs are part of the federal stimulus plan and provide a 35% rebate on interest costs to issuers or a tax credit to investors, at the issuer's discretion. While a BAB could draw a higher taxable financing cost to the issuer than a tax-exempt bond, the 35% federal government giveback turns it into a lower borrowing rate.

"By placing a large issuer's paper in the taxable market, BABs can free up capacity for the [same issuer] in the tax-exempt buyer base," Bank of America's Merrill Lynch muni analysts said in a report on Monday. "In addition, in the short run, BABs reduce the supply of bonds in the tax-exempt area."

When issued in large amounts and structured differently than the typical municipal bond, these securities could attract nontraditional muni investors, such as pension funds and foreign governments.

"The BAB bonds are giving investors the opportunity to diversify risk into an asset class which historically is very stable," said Gary Pollack, head of fixed-income trading and research at Deutsche Bank Private Wealth Management in New York.

http://online.wsj.com/article/SB124023363063234893.html
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