And here I thought it was just about funneling contracts to General Electric.*
[you are such a naïf -ed]
From Reuters' MuniLand blog:
The Infrastructure Privatization Bank
The first time many heard about the United States creating a infrastructure bank was in President Obama’s Thursday speech, but the idea has actually been floating around Congress for a number of years. Former U.S. Senator Chris Dodd of Connecticut proposed the idea in 2007 with inauspicious timing. From the American Water Works Association:
In an eerie coincidence, legislation to create a National Infrastructure Bank to address the need for financing of infrastructure projects was introduced with bipartisan support in the US Senate the same day a bridge collapsed in Minneapolis.The horrific 2007 bridge collapse in Minneapolis is often used as the poster child to promote a national
In 2007 there were 75,000 other bridges in America that had the same rating of “structurally deficient” as the Minneapolis bridge; the problem continues today. The need for massive spending on our roads and bridges is well understood by everyone.
I think there is some misunderstanding though about the purpose of the proposed infrastructure bank. On the surface it appears to be an alternative source of funding for common transportation, water and energy projects. But its real purpose seems to be a means of spurring a large infrastructure privatization movement in the United States.
Senate Resolution 652, sponsored by Senator Kerry of Massachusetts, would create the American Infrastructure Financing Authority. The AIFA would require that funded projects generate revenues to repay the loan to the infrastructure bank. For the Minneapolis bridge project to be funded it would have needed to be a toll bridge rather than a free bridge (or have a government entity repay the loan). It’s a PayGo Infrastructure Bank.
Currently almost all American infrastructure is funded either through municipal bonds or federal funding. Even as federal funding has been constrained, municipal bond issuance has been very low this year, running at about half of last year’s rate. There is plenty of capacity to fund infrastructure with municipal bonds. From a funding standpoint it’s not clear why we need an infrastructure bank, especially a paygo infrastructure bank.
The AIFA legislation is very specific about the type of projects that can be funded:
The legislation seems to require public-private partnerships for funding. In the bill’s criteria for loan approval, there’s a preference for those projects which maximize private investment (page 41):
- Highway or road
- Mass transit
- Inland waterways
- Commercial ports
- Air traffic control systems
- Passenger rail, including high-speed rail
- Freight rail systems
“the extent to which the provision of assistance by AIFA maximizes the level of private investment in the infrastructure project or supports a public-private partnership, while providing a significant public benefit”Conceivably Warren Buffett’s Burlington Northern Santa Fe railroad could team up with a small municipality and receive below-market loans to fund improvement of their rail systems. There is a lot of gray area defining “public good” in the legislation and this makes way for many projects that might have a larger private component....MORE
HT: naked capitalism
General Electric's Immelt Calls for Tax Holiday on Overseas Funds, Hows About we Just let Them Leave the Money in China? (GE)
Have you wondered why the multinationals are pushing to get their cash back to the United States?Aug. 23
Because it is the best of the bad options.
Do you think that G.E. wants to have billions in cash in Communist China?
Or that Google wants billions in Ireland, gang-raped by the bankers and politicians and desperate for revenue?
They are terrified that they won't be able to repatriate but at the same time don't want to pay any tax on the money.
So they gussie the idea in the cloak of "jobs" or "infrastructure", anything to get the politicians on board to help them get their loot back under the rule of law....
Economic Policy Journal Doesn't Much Care for the National Infrastructure Bank
"A Fannie Mae for 'infrastructure.'" (GE)
That's one of the more evocative headlines I've seen in a while.