Sunday, January 25, 2009

Obama's team turn to EU bank for inspiration - Business News, Business - The Independent

Obama's team turn to EU bank for inspiration - Business News, Business - The Independent

President Barack Obama's administration is looking to establish a $60bn (£43.5bn) infrastructure bank based on the European Investment Bank (EIB), which is bailing out small UK businesses hit by the financial crisis. ...It is estimated that the backlog of [U.S.] road repairs is close to $5 trillion.

A spokesman for the Federal Highway Administration said on Friday: "There are no plans currently in place, as the US Secretary of Transportation was only sworn in yesterday. [But] I can tell you that state infrastructure banks are being considered."

These banks would have lent states cash for roads projects, but instead the new transport team, led by former congressman Ray LaHood, have been impressed by the EIB model. Rather than just act as a middleman directing money from central government, the EIB can raise funds from the capital markets through a mix of commercial paper and bonds. In 2007, the EIB borrowed €55bn.

Also, the EIB lends to specific projects rather than to individual EU states. This, said one EU source, has intrigued the Obama team, which originally planned to lend money to states rather than to specific transport schemes. If the US bank follows the EIB's lead, it could look at infrastructure projects beyond roads, such as housing and hospitals. Bridges are also likely to be highlighted, as more than a quarter across the US are in a state of serious disrepair...


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