Banks ... Are The New Government

Cities Debate Giving Away Public Infrastructure to Bankers
JENNY ANDERSON
The New York Times
August 29, 2008
Cleaning up road kill and maintaining runways may not sound like cutting-edge investments. But banks and funds with big money seem to think so.

Reeling from more exotic investments that imploded during the credit crisis, Kohlberg Kravis Roberts, the Carlyle Group, Goldman Sachs, Morgan Stanley and Credit Suisse are among the investors who have amassed an estimated $250 billion war chest — much of it raised in the last two years — to finance a tidal wave of infrastructure projects in the United States and overseas.

Their strategy is gaining steam in the United States as federal, state and local governments previously wary of private funds struggle under mounting deficits that have curbed their ability to improve crumbling roads, bridges and even airports with taxpayer money.

With politicians like Gov. Arnold Schwarzenegger of California warning of a national infrastructure crisis, public resistance to private financing may start to ease.

“Budget gaps are starting to increase the viability of public-private partnerships,” said Norman Y. Mineta, a former secretary of transportation who was recently hired by Credit Suisse as a senior adviser to such deals.

This fall, Midway Airport of Chicago could become the first to pass into the hands of private investors. Just outside the nation’s capital, a $1.9 billion public-private partnership will finance new high-occupancy toll lanes around Washington. This week, Florida gave the green light to six groups that included JPMorgan, Lehman Brothers and the Carlyle Group to bid for a 50- to 75 -year lease on Alligator Alley, a toll road known for sightings of sleeping alligators that stretches 78 miles down I-75 in South Florida.

Until recently, the use of private funds to build and manage large-scale American infrastructure assets was slow to take root. States and towns could raise taxes and user fees or turn to the municipal bond market.