The Federal Reserve released the minutes of its mid-September meeting Wednesday afternoon, and they reveal starkly different perspectives on federal vs. state and local governments.

At the national level, Fed staff saw government dysfunction as a risk to the economy, according to a summary of the staff’s economic assessment (emphasis added).

[The economic] risks were viewed as skewed to the downside, reflecting concerns about the economic effects of the recent tightening in U.S. financial market conditions, the resolution of federal fiscal policy issues in the coming months, the economic and financial stresses in the EMEs, and the ability of the U.S. economy to weather potential future adverse shocks.

In other words, the federal fight over fiscal policy could negatively impact the economy. But, Fed staff noted, markets are seeing improvement among state and local governments:

In the municipal bond market, despite the ongoing bankruptcy proceedings for Detroit and greater scrutiny of Puerto Rico’s fiscal problems, broader market sentiment was reportedly supported by the lessening in budget pressures for many other state and local governments.

The federal government seems to leap from crisis to crisis. But the Fed thinks state and local governments are actually tackling their difficult budget problems.