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New Jersey Businessman Publishes a Novel, but Not a New, Idea

Sept. 12, 2017 (EIRNS)—Fox Business News today published a novel proposal from the CEO of a New Jersey-based financial company: Form a large national infrastructure bank from the Federal Reserve, by ordering it to place part of its assets into such a bank to issue masses of credit for new infrastructure.

Contacted today by EIR, WBI Investments head Don Schreiber said that the United States needs to invest "not $1 trillion, but $20 trillion over 20 years to build a new infrastructure." He added, "The economy is way underperforming, and the key thing is the new productivity you get from that." Schreiber said he had "gotten nowhere" circulating his idea so far, and was happy to get involved in broader efforts.

His Fox Business column notes that

"our current situation seems reminiscent of the events preceding the ... collapse of the housing market in 2007. It’s clear that the monetary stimulus enacted by the Fed following the start of the 2008 Financial Crisis and Great Recession has now run its course and is failing to boost economic growth."

To do so, he says, would require a capital budget, but there has been none. Infrastructure is crumbling and we need

"$3.6 trillion investment by 2020 to prevent near-term disaster. This was true before Hurricane Harvey wreaked havoc on southeast Texas; now, the situation is even more dire."

Schreiber also cites the China model.

"China spends 8.6% of its GDP on building up roads and railways to support economic growth—that’s more than triple the 2.5% the U.S. spends. In the past 30 years, China has grown from an emerging economy to the second largest in the world, and for the last 10 years, that growth has been primarily driven by infrastructure spending."

The novelty of Schreiber’s idea is that instead of starting to sell off its $4.5 trillion in "quantitative easing" assets, triggering terror of a financial crash from rising rates, the Fed should place a large part of those assets in an infrastructure credit bank, answering to the Treasury in the manner of a Government-Sponsored Entity (i.e., Fannie Mae, Freddie Mac).

Notably, President Franklin Roosevelt proposed very much the same thing as legislation in April 1934, which was blocked in the Senate Banking Committee. Fed Chair Ben Bernanke strictly rejected such an idea during Congressional testimony.

Schreiber writes,

"Creating an infrastructure bank from excess funds in the Fed’s balance sheet would allow critical infrastructure needs to be addressed quickly and could provide a significant boost to our faltering economy."