How a National Infrastructure Bank Might Work

Source: William J. Mallett, Congressional Research Service, CRS Insight, IN10572, September 15, 2016

…. Proponents of a national infrastructure bank typically see it as a way to provide low-cost, long-term loans, loan guarantees, and lines of credit on flexible terms to support infrastructure projects. Policy choices include the following:
• Infrastructure type. Some proposals focus on one type, such as transportation or energy, but most would support a wider spectrum of sectors.
• Institutional form and governance. Most current proposals would create a wholly owned government corporation governed by political appointees. But other models exist, including placing the bank inside an existing government department and creation of a government-sponsored enterprise with an independent board.
• Funding source. Under the Federal Credit Reform Act of 1990, credit assistance by the bank would be supported by an appropriation that pays the subsidy cost and administrative cost. Assuming a 10% subsidy cost, every $1 appropriated beyond the amount of administrative costs would enable the bank to lend $10 to projects. Alternatively, a bank could operate as a revolving fund, such that credit assistance and administrative costs are limited to the size of the appropriation, but funds from repaid loans could be used to make new loans. In some formulations, an infrastructure bank would raise its own capital through bond issuance. ….