Obama's team turn to EU bank for inspiration

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.

The President's transition team has met at least one City figure close to the EIB to discuss how to set up a bank dedicated to rebuilding America's creaking transportation infrastructure. It is estimated that the backlog of 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.

The source added: "Obama's new government is talking about a $50bn-to-60bn infrastructure bank. The EIB is going to lend more than that this year, so the US is now looking at how the bank operates."

The Chancellor, Alistair Darling, announced in November that the EIB, as well as providing £300m to the programme to rebuild every secondary school in the UK, had pledged £4bn to small UK businesses by 2011.

Ailing infrastructure is one of the big problems facing Mr Obama. According to a survey by KPMG, 75 per cent of US executives claim that their companies will face an operating cost rise as a result of poor infrastructure. The report cites communications giant AT&T, which moved its headquarters from San Antonio to Dallas for better air travel links. More than half those surveyed in North America were concerned that local workforces lacked the training to improve local infrastructure.

Last month, California governor Arnold Schwarzenegger argued in Newsweek: "Our infrastructure is more than just a quality-of-life issue. It is an economic issue.... We are a dinosaur economy trying to compete in a space-age global environment."

More than 300 directors – 47 per cent chief executives – from 21 countries were surveyed by KPMG last November and December. Roads were in the top two areas of infrastructure in most urgent need of investment in every region of the world. Energy generation, schools and hospitals were all widespread concerns, though water infrastructure was considered particularly poor in India and China.

Independent Comment
blog comments powered by Disqus
Career Services

Day In a Page

No secularism please, we're British

No secularism please, we're British

Arguments about the role of religion in national life have recently acquired a new urgency
Harold Tillman: 'Chinese tourists can save the high street – if we let them'

Harold Tillman interview

'Chinese tourists can save the high street – if we let them'
Working as a jail torturer ruined my life

Working as a jail torturer ruined my life

Meet the former soldier who has joined the political prisoners he tortured in Turkey's Mamak prison by suing the generals who led a regime of terror
The local high street jet shop

The local high street jet shop

Got a spare $50m and can't stand the queues at Heathrow? Get yourself down to London's first private plane dealership
Do you like your doctor? It could be the death of you

Do you like your doctor?

It could be the death of you...
The mysterious affair of how Agatha Christie is teaching foreigners English

How Agatha Christie is teaching foreigners English

Twenty of the author's novels have been adapted and presented with learning notes and a CD
Six Grammys, five years off: Adele puts love before career

Six Grammys, five years off

Adele puts love before career
The 10 Best binoculars

The 10 Best binoculars

From no-frills to bins with digital cameras
Milan for £300

Milan for £300?

A cultural family holiday - on a budget - to Italy's most stylish city
'Black-hole' resorts: Turn up, tune out, log off

'Black-hole' resorts

Turn up, tune out, log off
New Arsenal face an old question of credibility in San Siro

New Arsenal face an old question of credibility in San Siro

Remodelled since winning in Milan in 2008, for all their consistency – and prize-money – Wenger's side are yet to claim a European title
James Lawton: This prodigal son deserves no forgiveness

James Lawton: This prodigal son deserves no forgiveness

City would be putting their desire to win title ahead of morals if Tevez plays for them
Mark Cavendish: Is Olympic gold at end of the rainbow?

Mark Cavendish interview

Is Olympic gold at end of the rainbow?
Apple admits it has a human rights problem

Apple admits it has a human rights problem

After years of complaints and workers' suicides in China the technology giant faces up to the human cost of its gadgets
Peter Moore: 'I feel guilty I'm the only one alive'

Peter Moore interview

'I feel guilty I'm the only one alive'