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Big Banks Got Huge Tax Cuts, Then Hiked Cities' Interest Rates

  • Tax cut triggers loan provisions that protect banks’ returns
  • Muni bank-loan market may be as much as $180 billion
American Foreclosure Bottoms at Atlanta Tower Auction

Photographer: Chris Rank/Bloomberg

As U.S. banks were tallying up the billions of dollars in extra profits they’ll reap from the sweeping tax cuts signed into law by President Donald Trump, they were quietly delivering unwelcome news to local governments: The interest rates on their loans were about to go up.

That’s because banks often include clauses in contracts when they lend to states and cities giving them the right to trigger the increases if legal changes lower the returns on their investments.