DeLauro’s “Infrastructure Bank”: planning our next recession

DeLauro’s “Infrastructure Bank”—a roadmap to re-create the economic meltdown of 2008

Here’s Rosa DeLauro’s “novel” idea: have Congress create a “National Infrastructure Development Bank” that could borrow huge sums with only a “small” federal outlay—yet, miraculously, this “bank” would be independent of any political interference. If this sounds vaguely familiar, you probably recall thinking that Fannie Mae was a private company that wouldn’t cost taxpayers anything.

Here’s a summary of  DeLauro’s  latest marketing tool to sell more spending to a skeptical public: for a guaranteed  low, low price of ONLY $30 billion or so, DeLauro says Congress can conjure hundreds of billions in new “loans” to rebuild “roads, bridges, and ports and broadband lines and smart grids.”     DeLauro claims that her bank would “put all those construction workers back to work” and “be good for the economy: not just for next year or the year after that, but for the next 20 or 30 years.”                                                                                                               

This is a carbon copy of the failed Fannie Mae model applied to public works—the same Fannie Mae model that sent our economy into a tailspin in 2008! The new “bank” would be owned by the government, capitalized by annual appropriations of $5 billion per year for five years, and would be authorized to issue a variety of debt instruments—that “supposedly” would not be guaranteed by the federal government—but doesn’t forbid a future “bail out”.  Funds would be used for loans and loan guarantees on eligible infrastructure projects. And the debt it issued would be “off-budget”—which means it wouldn’t show up in annual outlays—so the REAL cost would be hidden from the public.

Why is Delauro’s infrastructure “bank” doomed to fail? For starters—it’s not even a “bank”! Normally, a bank acts as a financial intermediary, borrowing money at one interest rate and lending it to creditworthy borrowers at a somewhat higher rate to cover the costs incurred in the act of financial intermediation. Banks survive by making a profit. That would not be the case here. Because “Bank-DeLauro” doesn’t make a profit, it’s not sustainable—thus its future bailout would be inevitable.

In quintessential DeLauro fashion, her annually-recycled bill is primarily concerned with creating the bank’s labyrinthine bureaucratic fiefdom: detailed job descriptions for the Board of Directors; how the unelected—therefore  unaccountable—Board members would be appointed; duties of the Board; duties of staff; creating an orderly project solicitation process; an internal process to evaluate, negotiate and award loans; “social objectives” criteria for evaluating projects, including “income distribution”, “inequality reduction” as well as “cost-effectiveness”—yet projects would be  devoid of any requirements for economic viability,  financial sustainability or a borrower’s creditworthiness .

Bank-DeLauro” would circumvent budgetary limits on federal spending by allowing unelected, political cronies (“appointees”) to create more deficit-financed money to politically-correct, favored construction projects. DeLauro’s bureaucratic concoction is quite similar, in fact, to the bureaucracy governing the Fannie Mae fiasco! (not to mention, the ObamaCare bureaucracy of 15 unelected, political appointees who soon will be making all decisions about your healthcare…).

DeLauro seems to forget that the federal government has a miserable track record of operating financial entities. Fannie Mae and Freddie Mac are merely the most recent and most costly examples of a long and pathetic history of federal financial incompetence—cultivated by DeLauro for over 22 years. DeLauro’s bill explicitly denies this “bank” the “full faith and credit” of the federal government—but a similar restriction did not deter a $150 billion bailout of Fannie and Freddie–whose debt was likewise not “guaranteed”—and ultimately led to the 2008 financial meltdown. Yet, when DeLauro first proposed her infrastructure bank, she EXPLICITLY described it as “an innovative public-private partnership—like Fannie Mae “, a comparison that should give taxpayers heartburn.  So, in essence, DeLauro is unwittingly proposing a model for our next recession—but this time it will be based on shaky lending to politically-connected contractors, rather that mortgage lenders. And DeLauro has been sponsoring this roadmap to economic failure for the past 14 years!

No one disputes that American public works need improving and, in fact, government has been spending huge sums to do so. Between 2001 and 2011 federal capital investment outlays more than doubled from $142 billion to $330 billion. Every major area of infrastructure—transportation, Army Corps of Engineers, energy—is up by at least 75% in the past decade.

The scandal is that we buy so little brick and mortar with all this money. Earmarking—DeLauro’s favorite way to spend your tax dollars—has wasted billions, flooding local communities with hundreds of millions of federal dollars for short-term, temporary construction spending, while adding few permanent jobs, minimal economic stimulus and little to long-term economic stability.  DeLauro’s proposed “infrastructure bank” would be governed by a five-member Board of Directors, appointed by the President and confirmed by the Senate. She blithely claims this arrangement would eliminate earmarking—but DeLauro and her cronies surely would find a way to influence the infrastructure bank’s lending. Indeed, retaining her elected office via huge out-of-state campaign contributions–made by contractors and construction unions who are guaranteed plum jobs–would demand such favoritism by DeLauro.

DeLauro’s imperious fixation on an “infrastructure bank” is a delusional distraction from our economic crisis—merely a new gimmick to maintain the same old, failing system. Her pseudo “bank” would do little to spur economic recovery, would do nothing to create new, permanent jobs—and primarily would benefit her biggest campaign contributors as well as those who profit from financial wreckage. DeLauro’s wearisome proposal has been rejected consistently over the past 14 years by bipartisan majorities in the House and Senate transportation and appropriations committees—and for good reason. Adding to the deficit to create a proven instrument of failure is no way to meet the economic challenges confronting our nation.

It’s time to retire DeLauro’s “bank” retread—and time to retire its perennial sponsor, as well. 

It’s time to have a REAL representative in Congress.

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