Why Banks Keep Buying Tax-Exempt Debt

Over the past two calendar years, commercial banks have been a significant source of tax-exempt financing for healthcare organizations. Driven by an expanded definition of “bank-qualified debt” provided in the American Recovery and Reinvestment Act of 2009, commercial banks issued approximately $70 billion of direct tax-exempt loans in 2009 and 2010. And, while the expanded definition no longer exists, commercial banks continue lending to not-for-profit and publicly-owned hospitals and healthcare systems by directly purchasing their tax-exempt debt (with fixed or variable interest rates).

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