Infrastructure Bank for America Act of 2020
H. R. 7231

The Infrastructure Bank for America Act of 2020 is legislation introduced in the US House of Representatives in June 2020 to establish a privately owned, privately funded, and privately managed infrastructure bank (the IBA). The IBA will receive no Federal Guarantee nor any Federal Funding and is similar in structure to the Federal Home Loan Bank System (FHLB), also privately owned, managed, and funded.

The COVID 19 crisis has caused the Federal Government to inject $ trillions into the U. S. economy, but little or none is going into infrastructure. The US needs the IBA to offer its bonds to investors, both domestic and global, to fund US infrastructure. The Federal Reserve can buy Treasuries and mortgage-backed securities, but not infrastructure bonds, because there are none in the liquidity and amount required. IBA bonds will help create a new asset class of “Infrastructure Bonds” in both size and liquidity.

The IBA will be a government sponsored enterprise (GSE) with the explicit “public purpose” of providing loans and loan guarantees to public and private entities, including states, counties, municipalities, public agencies, and State Infrastructure Banks to finance infrastructure projects. As a special purpose wholesale bank, the IBA will lend to infrastructure projects and will leverage other funding streams including loans, investments, and grants from public and private sources.

To encourage initial equity investment in the IBA, the legislation provides tax incentives for those investments during the first three years of the IBA’s existence. The IBA intends to initially raise $1 billion in equity and $10 billion in debt. The goal is to raise $1 trillion of equity and debt within 8 to 10 years to finance infrastructure projects and to fund State Infrastructure Banks.

The Federal Reserve shall have oversight and supervisory authority over the IBA, and the Secretary of the Treasury will have authority to approve the issuance of all notes and bonds. The Office of the Comptroller of the Currency must authorize the Federal Bank Charter for the IBA. When our bill is passed by Congress, the IBA will have status as a GSE.

There are 35 State Infrastructure Banks, only 4 or 5 of which are active. Among the success stories is the California Infrastructure and Economic Development Bank, which is privately funded and does not rely on Federal or State funds. Since its inception in the mid-1990s, none of its customers have defaulted on loan payments. The California model is a good model for both the Bank and the other State Infrastructure Banks, and its bonds are rated AAA by all three rating agencies.

The IBA will encourage and will enable large-scale private investment in American infrastructure by institutional investors, pension funds and sovereign wealth funds. The purpose of the IBA is to be the entity to capture these funds for investment in US infrastructure, especially during and after the COVID 19 crisis.

For additional information, the website for the IBA is: www.infra-bk.com.