Obama Calls for $50 Billion Infrastructure Stimulus and "Permanent Infrastructure Bank"

Infrastructure bank? Be wary. Very, very wary.

Obama calling for more infrastructure spending
(Julie Pace, 9/6/2010 AP via My Way News)

"WASHINGTON (AP) - Vowing to find new ways to stimulate the sputtering economy, President Barack Obama will call for long-term investments in the nation's roads, railways and runways that would cost at least $50 billion.

"The infrastructure investments are one part of a package of targeted proposals the White House is expected to announce in hopes of jump-starting the economy ahead of the November election. Obama will outline the infrastructure proposal Monday at a Labor Day event in Milwaukee.

"While the proposal calls for investments over six years, the White House said spending would be front-loaded with an initial $50 billion to help create jobs in the near future.

"The goals of the infrastructure plan include: rebuilding 150,000 miles of roads; constructing and maintaining 4,000 miles of railways, enough to go coast-to-coast; and rehabilitating or reconstructing 150 miles of airport runways, while also installing a new air navigation system designed to reduce travel times and delays.

"Obama will also call for the creation of a permanent infrastructure bank that would focus on funding national and regional infrastructure projects.

"Administration officials wouldn't say what the total cost of the infrastructure investments would be, but did say the initial $50 billion represents a significant percentage. Officials said the White House would consider closing a number of special tax breaks for oil and gas companies to pay for the proposal." [Emphasis is mine. The article continues.]

Hahahahahahahahahaha.....

So they don't even tell us how much the total cost would be, other than this initial $50 billion which "represents a significant percentage". What is a significant percentage for this administration? 5%? 10%?

And he wants to do it by penalizing the particular industry that he probably believes the sheeple of the United States will be happy to see penalized - the oil industry, because of the Gulf of Mexico oil spill (I'm guessing).

But I find the mention of "a permanent infrastructure bank" very peculiar. Maybe I'm paranoid, but I suspect the whole point of this "stimulus" exercise is to set up this bank, and I don't like the smell of it.

The White House fact sheet says this:

Infrastructure Bank. The President proposes to fund a permanent infrastructure bank. This bank would leverage private and state and local capital to invest in projects that are most critical to our economic progress. This marks an important departure from the federal government’s traditional way of spending on infrastructure through earmarks and formula-based grants that are allocated more by geography and politics than demonstrated value. Instead, the Bank will base its investment decisions on clear analytical measures of performance, competing projects against each other to determine which will produce the greatest return for American taxpayers.

Hmmmm. My questions:

1. So, instead of giving money to the states outright, is this bank going to make loans, with the infrastructure to be built as collateral?

2. Who's going to run the bank? Bernanke? Geithner? Goldman Sachs? Pimco? All of them? (Oh sorry, Morgan Stanley, too, now that the Chinese have more stake in the firm..)

3. Who's going to decide the loan terms and "clear analytical measures of performance"? Bernanke? Geithner? Goldman Sachs? Pimco? Obama? Congress? All of them?

(How are they going to measure the performance of asphalt pavement?)

4. Who's going to decide what is "most critical to our economic progress"? How is "critical" defined, and by whom? How is "progress" defined, and by whom?

5. "Leverage"? How? Will it be like Geithner's PPIP (remember that one?), where the taxpayers pay for 90% of the loan and 10% by the private investors, and the private investors take the upside? Will the investors set to collect fees, tolls etc. from the funded projects in exchange for the "risk" they take in participating? Or worse, if a state defaults on the loan, the taxpayer-funded portion of the loan will be non-recourse, and the private investors will get the collateral (infrastructure)? Is this bank a clever ploy to transfer public assets into private hands selected by the government?

6. Is this bank going to securitize the loans and/or create more leveraged instruments like CDOs to sell to investors? Will the initial $50 billion be leveraged 5 times? 10 times? 20 times? 50 times? Who will be responsible when the leverage blows up? (Answer: hapless US taxpayers.)

(I can see a whole set of leveraged instruments out of this bank - CDOs, CDS, interest rate swaps, the usual suspects. Except this time, it will not be Wall Street banks creating and selling them; it will be the US government in cahoots with private investors who will probably include Wall Street banks but not limited to them.)

7. Do you smell a new financial bubble? Is it all nice and dandy if your government does the blowing?

The Third Reich's leaders would be proud.

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