The proposal to establish a national bank for infrastructure projects pre-dates the economy’s collapse, but it looks like this tragedy is giving the idea some legs. Starting in 2007, this idea has gained some traction in Congress, and President Obama has called for a national infrastructure bank as well.
Originally proposed by Everett Ehrlich and Felix Rohatyn, a former banker, diplomat, and mayor of New York City, this new way of funding infrastructure projects has three advantages over the federal government’s current method. Ehrlich and Rohatyn say that their bank will issue bonds for specific projects, much like states and local municipalities, and thus won’t have to pay for projects in their entirety up front, like the federal government currently does. As a bank, this entity would also be much more flexible in how it distributes funds. It could provide interest rate subsidies, lend money to states, or provide direct subsidies. And because it would be governed by a non-partisan, independent board, wasteful, messy, and politically expedient pork barrel projects wouldn’t pass muster. The bank would be capitalized by the standard $60 billion that the government usually spends on infrastructure per year, and estimates of how much total construction dollars to be had by leveraging this amount range from $250 to $600 billion. That’s a lot of bridges and water filtration plants. . . .