WASHINGTON UBS Americas threw support behind the Obama administration's proposal for a U.S. infrastructure bank on Tuesday, but warned against creating a quasi-government agency like housing finance enterprises Fannie Mae and Freddie Mac.
"Creating a national infrastructure bank is an idea whose time has come," Robert Wolf, chief executive of UBS Americas, told at a Senate Banking Committee hearing called to explore alternatives for financing infrastructure projects.
Wolf said Congress should establish a national grant and lending institution that would leverage private investment to finance transportation and other big-ticket projects like rail, road, water, broadband or airport upgrades.
But, he said, it should not have private shareholders. Rather, Wolf said, it should be capitalized through the U.S. Treasury Department to avoid the problems experienced by hybrids Fannie Mae and Freddie Mac that were held by private shareholders but benefited from government sponsorship.
Fannie and Freddie were seized by the Treasury two years ago after losses during the U.S. housing market collapse and recession. Taxpayers have poured $150 billion into the lenders to keep them afloat.
Obama proposed a $50 billion infrastructure spending program earlier this month to rev up the economy and create jobs. The bank, Obama said, could be one way of financing the highest-priority projects.
Obama envisions creating the bank as part of long-term infrastructure spending legislation expected to take shape in 2011. Presidential advisers have suggested capitalizing the bank at $25 billion.
Obama, many in Congress and transportation experts acknowledge that present infrastructure funding mechanisms that leverage gas taxes and other user fees cannot keep pace with necessity and demand and that other options are necessary.
Last year, the federal highway trust fund nearly ran dry before Congress rescued it with emergency cash.
Proponents have said that investments from private equity and pension funds and other sources would complement federal capital.
Projects could generate revenue through tolls or other fees that would provide long-term, low yield returns for investors. Other projects would offer tax advantages as the primary benefit of investment.
Wolf, who said any infrastructure bank should be transparent and work alongside other government-run credit programs for infrastructure construction, cited figures that show $180 billion in private capital available for infrastructure investment.
"When I hear that an infrastructure bank will not cost taxpayers a dime, I wonder why federal resources and guarantees are needed," Senator Richard Shelby said during the hearing.
Pennsylvania Governor Edward Rendell said an infrastructure bank would be a part of transportation funding and similar to other successful subsidy programs like Build America Bonds, taxable financing that has lowered borrowing costs for state and local governments.