Dylan Ratigan, formerly host of CNBC’s Fast Money and now host of MSNBC’s The Dylan Ratigan Show, created quite the spectacle yesterday… freaking out in a surreal, but sublime, fashion about the failures of the president and Congress. In a tirade where he refers to “10s of billions of dollars being extracted from the USA… an integrated entire system, financial system, trading system, taxing system… created by both parties over a period of two decades at work on the entire country.”
In the unlikely event that you missed the video, you can witness his fury in all its glory in the clip below.
Now, in the video, Ratigan recommends the president give a speech to “abandon the bought Congress,” and then begin the process of investing in solving the problem. How? He suggests that the US “begin an infrastructure bank with 2 percent lending.”
It sounds like an interesting kernel of an idea, so we dug around a bit to for a deeper explanation of what Ratigan may have been specifically proposing.
Here’s the concept, in more detail from Bloomberg:
“Creating a national infrastructure bank presents a harmonized solution to these two problems [US unemployment and failing infrastructure] that should be feasible even in austere times. Airports and transportation networks, levees and dams, water and energy systems are deteriorating. The American Society of Civil Engineers estimates that 25 percent of our bridges are deficient, 7 billion gallons of clean water are wasted each day because of leaking pipes, and a third of our major roads are in poor or mediocre condition. The costs of all this to U.S. businesses — in delays, accidents, lost productivity, red tape — are enormous.
“Yet improving such facilities adequately, the ASCE estimates, would require a five-year investment of $2.2 trillion. If you’ve been within shouting distance of Washington lately, you know that finding anything near such a sum is an impossibility. So a revitalization program that doesn’t rely entirely on federal munificence is crucial.
“Enter the infrastructure bank, which would provide loans or loan guarantees for big projects deemed to be in the public interest — and attract private investment by offering cheap access to capital and a path to profit from tolls, fares and other charges.
The bank could leverage the government’s outlay to lend more. An initial $5 billion a year for five years could result in $50 billion or more in loans. And because these loans would be paid back with interest, the institution could become self-sustaining [...] Every dollar spent on public infrastructure yields a $1.59 boost to gross domestic product, estimates Mark Zandi of Moody’s Analytics.”
According to Bloomberg editors, a number of suggestions for how the bank could be set up are already circulating through the halls of Congress. With current US infrastructure failings costing an estimated $2 trillion over a recent two-year period, you can understand the plan’s appeal. For more details see Bloomberg’s article on how a bank can get more Americans bank on the job and on the road.
Rocky Vega,The Daily Reckoning
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
i’m not sold, rocky, but i’m paying attention.
let’s see, now:
1) abandon congress; they are just a bunch of crooks.
2) start a new “bank” with funds which must be approved by…congress!
3) ok, then we get some private “investment” with a path to profit by charging citizens fares, tolls, and other fees b/c their taxes/debt were used to help these “investors” build something by “people who need jobs” who will then pay to use the new infrastructure.
4) mark zandi of “moody’s” which is owned by warren buffett, who owns a huge piece of goldman/sachs, itself an investment bank/brokerage, not to mention a giant railroad in the West, thanks to a gov’t wink & a goldman/sachs financing nod, can show, right now, how this GDP positive and will most likely become self-sustaining and oh, boy!
5) and as a bank, it will be overseen by the FED, of course.
what could possibly go wrong?
now, if you’re a buffett, or a goldman big shot, or even bill bonner, you could make a ton of money getting in on the ground floor of this tax-subsidized plan for the rich to get richer, and collect “rents” on US superstructure, while controlling the contracts, too! but just because a media shill like ratigan “presents” this in such an innocent yet fiery way, THAT DOESN’T MAKE IT A GOOD IDEA FOR AMERICA, NOW, DOES IT?
you still with me rocky? really?
not.4.moi has already mentioned most of what I was going to say, so I’ll add just a few more items:
1) FNMA, Freddie Mac…government’s last big step in to the construction biz. Need I say more?
2) Improving infrastructure is great, but in and of itself is only a support structure for an economy. You have to have production gains to make this worthwhile. Businesses would save some money, but whether or not all of these “make work” jobs funded by ultra cheap money would translate into long-term, sustained growth is questionable. Ultimately, it has to lead to increased trade internationally, else we’re just pouring more concrete and paying for it ourselves.
I think the money needs to be around 6 – 8%, which is still lower than the historic cost of capital. Capital NEEDS to have a significant cost to reduce the tendency of people to borrow / lend money for mediocre or downright stupid ideas. Someone will build a bridge to nowhere in the name of “creating jobs” if money is at 2%. If you’re paying 8%, you’ll think about it a bit more carefully before taking the plunge, and only the worthwhile projects will still get done.
There are some roads and bridges that need to be abandoned. Ever drive thru Arizona? There are stretches of 4 lane highway I drove on 6 years ago where I wouldn’t see another car for 10 minutes…OVERKILL! That needed to be a 2-lane, maybe.
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