* UBS Americas CEO recommends no private ownership
* Says bank should be capitalized by Treasury Dept
* Proponents see revenue from projects, tax savings
* Pensions funds, private equity could invest
(Adds infrastructure investment figures, companies, Sen. Kerry
By John Crawley
WASHINGTON, Sept 21 UBS Americas UBSN.VX (UBS.N)
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 a
Senate Banking Committee hearing called to explore alternatives
for financing infrastructure projects.
Wolf said Congress should establish an institution that would
leverage private investment to finance transportation and other
big-ticket projects like rail, road, water, broadband or airport
He recommended that it not have private shareholders. Rather,
Wolf said, it should be capitalized through the U.S. Treasury to
avoid the problems experienced by hybrids Fannie Mae FNMA.OB and
Freddie Mac FMCC.OB that were held by private shareholders but
benefited from government sponsorship.
Fannie and Freddie were seized by 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
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 through grants and loans. Wolf favors a
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.
Public investment in transportation infrastructure in 2006 was
about $140 billion, split between the federal government and state
and local governments.
The U.S. has been slower than other regions to adopt forms of
private financing for infrastructure. Europe's infrastructure
bank, the European Investment Bank, financed $350 billion in
projects from 2005-09 to help modernize ports, reconfigure city
centers and expand airports and rail lines.
Australia's Macquarie Group (MQG.AX) is the global leader in
private infrastructure investment, according to Infrastructure
Investor magazine rankings.
Others include Goldman Sachs (GS.N) and Alinda Capital
Partners, the largest U.S. manager of pension funds for
Companies like equipment maker Caterpillar Inc (CAT.N),
General Electric Co (GE.N) and privately held engineering firm
Parsons Corp could benefit from stepped-up spending in this area.
The American Society of Civil Engineers estimates it will cost
more than $2 trillion to bring roads, bridges, and other
infrastructure to a state of good repair.
"We're talking staggering sums here, and it clearly reflects
just how much we have neglected our infrastructure," said Senator
John Kerry, who is a lead voice for an infrastructure bank in the
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
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 a bank would be a
part of an effort that would include more traditional
transportation funding and other successful subsidy programs like
Build America Bonds, taxable financing that has lowered borrowing
costs for state and local governments. Obama has proposed making
this program permanent.
(Reporting by John Crawley; Editing by Phil Berlowitz)