In 2015, Justin Trudeau promised to build a Canadian Infrastructure Bank. It was a good idea. But it has become a bad idea, thanks to a man named Larry Fink and a Wall Street investment firm named Black Rock. Linda McQuaig writes:
Larry Fink . . . epitomized what had gone wrong with Wall Street. Years earlier, Fink had helped develop the market for mortgage-backed securities -- a market that later helped trigger the 2008 financial crash.
The talented Mr. Fink went on to be the U.S. Treasury's key adviser on the $700 billion Wall Street bailout -- widely regarded as a gigantic giveaway to some of the world's richest people.
In January 2016, Fink met newly elected Canadian PM at the annual billionaires' retreat in Davos. The conversation quickly turned to infrastructure, which interested them both.
Now Trudeau proposes to let investment bankers in on the ground floor of the infrastructure bank. But that notion is fraught with problems:
Involving private investors dramatically drives up the costs, leaving Canadians paying much more, either through taxes, tolls or user fees, notes Toby Sanger, an economist who now heads the Ottawa-based group Canadians for Tax Fairness.
Sanger points out that, under the low-interest-rate scenario proposed by Trudeau, Ottawa would raise the money itself -- by selling government bonds to the public. (Ottawa currently pays only 1.4 per cent on a 30-year bond, allowing it to get the money almost for free.)
On the other hand, Sanger notes, private investors expect high rates of return, typically between seven and nine per cent.
The new bank will also allow investors to end up owning some of the projects they invest in.
That's the same playbook Mike Harris used when he leased Highway 407 -- built and paid for by Ontario taxpayers -- for a song. The new owners have been making a killing on the toll road. They've been doing that for twenty years. And the lease runs for another 79 years.
COVID has underscored just how foolish -- the word insane comes to mind -- such public policies are. It is simply stupid to continue such folly.
Image: kawarthanow.com
6 comments:
You don't get donations from business without doing favours for business. That's what this is all about.
Precisely, thwap.
While his handling of the pandemic has earned Trudeau a lot of goodwill, Owen, it would be foolish not to scratch beneath the surface of all government policy choices. Your post makes that abundantly clear, as does the whole WE fiasco now in the news.
I'm generally pleased by the way Trudeau has handled the pandemic, Lorne. But it would be foolish to ignore those who seek favour for profit. That kind of thinking has put us in our present position.
I recently finished McQuaig's "The Sport and Prey," and Trudeau comes off as a bit of a dope in all things financial.
McQuaig's political sympathies have always been with the NDP, Marie. So her take on Trudeau isn't surprising. On the other hand, her analysis has always been strong -- and it should not be ignored.
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