By Lisa Lambert
WASHINGTON (Reuters) - Senator Ron Wyden told a White House meeting he is ready to propose a new version of the Build America Bonds program that was part of the federal stimulus plan and that expired in December.
The very popular taxable bonds paid issuers federal rebates equal to 35 percent of interest costs.
"The Build America Bonds, in the year and a half we had them in the Recovery Act, were wildly successful," said Wyden at a meeting of the President's Export Council on infrastructure.
"Folks have been concerned that they've been popular and have been used for other circumstances. So, this time it looks like there will be bipartisan support to rebrand them and get them reserved just for transportation, only for transportation," he said.
After their debut in April 2009, issuers sold more than $180 billion BABs, "a breathtaking sum," Wyden said.
So far, three bills have been introduced in the House of Representatives to revive them, but the Senate has yet to take up any legislation and the $2.9 trillion municipal bond market is eagerly waiting for Wyden to unveil his proposal for a "rebranding."
Wyden, a Democrat, said the new bonds in his bill would be called TRIPS, standing for Transportation and Regional Infrastructure Bonds, and he hoped the new moniker would help generate support from both parties.
He added that getting Republicans and Democrats to agree on other ideas for generating revenue for transportation, such as an infrastructure bank, would be a struggle but that "TRIPS bonds already are pretty much ready to go."
Congress had two aims with Build America Bonds. Because they were intended to finance infrastructure, the bonds would help provide jobs for construction workers displaced by the housing market collapse. Also, they were structured to thaw the municipal bond market, which froze at the end of 2008.
The end of the BABs program meant that states and cities lost a vital credit lifeline, and they have been worried that their costs to borrow could rise just as they are confronted with budget problems caused by the 2007-2009 recession. The housing market collapse, financial crisis and recession ravaged their revenues and forced them to cut spending, hike taxes, turn to the federal government for help and borrow at higher levels to keep their budgets balanced.
Issuers rushed to sell the debt because of the hefty rebates. Most proposals to bring BABs back have lowered the subsidy, with President Barack Obama suggesting the lowest rate of 28 percent of interest costs. Wyden did not describe how the subsidy would work under his bill.
A move in December to extend the program failed in Congress after Republicans demanded it be cut from a tax deal.
And while the Republican head of the House of Representatives Transportation Committee said he will consider a "reincarnation" of BABs in a sweeping roads and highways bill, Republican opposition to BABs remains strong.
Powerful Republicans such as Rep. Paul Ryan and Sen. Orrin Hatch, say states in the worst shape will have to sell the bonds at high interest rates, which will garner them the steepest subsidies.
An advisor to the Republican Chairman of the House Ways and Means Committee on Thursday responded to a Democratic proposal to temporarily reinstate the BABs program by saying "it is simply a subsidy for state and local governments to go deeper into debt."
(Additional reporting by Kim Dixon; Editing by Theodore d'Afflisio)
55 comments
- 1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this commentdelusional_liberals Mon Mar 14, 2011 02:28 pm EDT Report Abuse
- 1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this commentTerryS Report Abuse
I love America but do not buy into this deal. The federal government needs to significantly reduce it spending. During President Obama's first 2 years, he and the liberal democrates in congress created a 4 trillion dollar deficit. Raising more money may be in order but only after the federal government learns to establish a reasonable budget and stay within it.
- 0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this commentChad Report Abuse
Yahoo and Obama can sell this junk if they wanted too---
- 1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentjack kreg Report Abuse
American does NOT need more borrowing, it needs a lot less gov spending.!!
Start by cutting politicians salary's in half, then move on to the gov staff, they need major cuts,
cut gov jobs,
cut gov salary's
cut gov, period!! - 1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentCyclopsz Report Abuse
We promise to use these funds for Transportation and Infrastructure. Well show us by using the existing state and federal gasoline and diesel taxes for transportation correctly. Currently using 1% for road and bridges and 99% for everything but. Selling Bonds to crease the treasury and hose future generations and make us more indebted to Foreigners is Not going to fix the fraud of raising money for one purpose then diverting 99% into general fund for special interest giveaways and political patronage.
- 4 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 2 users disliked this commentKerd Report Abuse
If it's proposed by a democrat? Buyer beware!
- 5 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 2 users disliked this commentReport Abuse
Screw build America bonds, end the debt cycle NOW. Fricken democrats always stealing from the public to give to Union hacks standing around 3 deep looking into a pothole.
- 5 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 2 users disliked this commentA Yahoo! User Report Abuse
Who buys this junk paper, the FED, with QE/stimulus dollars?
Just wait until the japanese start redeeming some or even all of their $900 Billion in US Treasuries to (help) pay for the rebuilding north of Tokyo...
Who is going to tell Japan that we're broke and that this is a bad time for all of us and the best thing that they can do is keep buying our bonds and don't worry that we can't really pay the money back that we borrowed but we can certainly keep making interest payments for time and all eternity... - 6 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 11 users disliked this commentReport Abuse
more funneling of money to the republican party , rnc etc. through big shots
the american middle class will foot the bill and a bunch of republicans and billionaires (actually that is the same thing) will get kick backs and rich....hmmmm sounds like more money laundering like the big shots....wisconsin is a perfect example.
go ohio, indiana, wisc. and any other state that will rip us off - 7 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentA Yahoo! User Report Abuse
Because QE2 and 1 were such a success, we need QE3 and 4...
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