The following may be one of the most important ideas which has received zero attention...and engendered zero excitement….during this campaign season. Infrastructure repair proposals pop up every few years. I saw a presentation of this one a week ago last Sunday at a Northern Virginia political meeting, it was presented by Alphecca Muttardy, former IMF Macroeconomist, and I wanted to present the idea here for your thoughts.
The first question most asked….including the other day by Markos...is “how will this be capitalized?” The bank will be capitalized like the successful National Banks that built the country. The capital will not be raised by new debt. $14 trillion in Treasury bonds have been sold in the country and internationally. The bank will offer holders of especially, longer term Treasuries, the opportunity to exchange their Treasury debt for preferred stock in the bank paying 4-5% annual interest. The expectation is that the bank would be able, in this way, raise $3-4 trillion in this new capital. The preferred stock, or bonds the bank will issue will be federally guaranteed, just like Treasury debt today, and is anticipated that it will offer 4% interest. These instruments can be subscribed to by banks, corporations, cities, states, pension funds, unions, universities, money market funds, etc. and will not exceed the amount of paid in capital of the bank.
How will it be governed?
The Board of Directors will be composed of people who have at least fifteen years’ experience in building infrastructure. It will also include members of the Corps of Engineers, AFL CIO, Building Trades, State and local officials with experience in infrastructure to help speed the implementation of projects. In other words, our kind of people, right? The original concept came from Alexander Hamilton. Not to mention New Jersey (which we rarely do).
This National Bank is not a new idea. It has been successfully implemented four times in our history, beginning with the First Bank of the United States under President George Washington and Treasury Secretary Alexander Hamilton.
This Hamiltonian model was followed by Presidents John Quincy Adams, Abraham Lincoln, and Franklin D. Roosevelt, specifically, FDR’s Reconstruction Finance Corporation (1932-1955). Under the Adams administration, the Second Bank of the United States financed many of the canals and railroads that were built in New Jersey. The city of Paterson, where a statue of Hamilton was erected, was launched by Hamilton personally with William Paterson, then governor of New Jersey. It was the first prototype industrial city in the nation and was funded in concert with the First Bank of the United States.
The bank will fund repair and renewal projects and new projects of a national scope---a modern passenger rail and freight rail system; a high speed rail system, a national water system, and power projects, as well as urban and rural repair, and the urgent national programs like rebuilding Puerto Rico.
This Bank will address the infrastructure deficit identified by the American Society of Civil Engineers, International Association of Machinists, and Building and Construction Trades as at least $4 trillion. This runs the gamut of bridge repair, port construction, sewage and water treatment, and other areas outlined in their reports.
It is conjectured that these projects will raise the output and productivity of the economy. During the 1933—1972 Golden Age of productivity, the productivity levels were 3-5% per year. . During the Golden Age there was a dramatic rise in the standard of living and level of output. Gross Domestic Product rose at over 12% per year from 1940-45.
The bank will adhere to Davis-Bacon wage levels, and Project Labor Agreements; the bank will also give preferential consideration to disadvantaged communities as it seeks to help rebuild the nation and address rural and urban poverty using the 10/20/30 formula in congressional legislation.
Does this proposal make sense? If we are serioius about infrastructure rebuilding...which, of course, Trump is not, can big idea proposals such as this do the job?
