HR 3221 was signed into law by President Bush on July 30, 2008, and contained an important provision of interest to non-profit hospitals that have seen higher interest rates and more cautious lenders as a result of recent bond market turmoil. The market turmoil triggered massive debt restructurings among tax-exempt borrowers in recent months, creating an acute need for new sources of credit enhancement. The legislation, supported by the American Hospital Association, allows the 12 Federal Home Loan Banks (FHLBs) to guarantee tax-exempt and other private non-profit hospital bonds with letters of credit. Letters of credit enhance the borrower's credit with the FHLBs' credit strength. The FHLBs letters of credit are only available for new bond issues. Consequently, hospitals restructuring their debt will have more limited options. The law became effective upon enactment and will sunset on December 31, 2010; however, existing letters of credit can be renewed after that date.

The new law, however, is not a panacea for all credit woes. For example, the FHLBs largely cannot relax their lending criteria to assist non-profit hospitals that are otherwise financially troubled. The credit-enhanced bonds are required to meet the safety and soundness requirements that were in effect on April 8, 2008. What remains unclear is whether the bond markets will recover sufficiently while this short-term fix is in place.