Donald Trump’s infrastructure spending plan has been given a cool reception by Wall Street bankers and investors who are already looking to invest hundreds of billions of dollars in private capital to rebuild America’s crumbling roads and bridges.
Mr Trump on Monday threw the covers off a long-awaited proposal to upgrade the nation’s roads, airports and other public works, along with measures to speed up approvals of shovel-ready projects. He hopes that a commitment of $200bn from the federal government over 10 years could produce a total outlay of “ at least $1.5tn,” by encouraging investment from state and local governments as well as private companies.
The plan drew some applause from bankers and asset managers who have been calling for measures to unlock spending on infrastructure in the world’s largest economy. But they noted that Washington is relying heavily on other parties to come up with funds, and that a bill could be blocked by a sceptical Congress.
“I think [the plan] is a step in the right direction,” said Trent Vichie, co-founder and co-chief executive of Stonepeak Infrastructure Partners, a 2013 spin-off from Blackstone that has about $14bn of assets under management, mostly in the US.
“But at the end of the day, there’s only so much the federal government can do to spur private investment because lots of assets are held by states and local municipalities.”
Wall Street has been champing at the bit for a while. According to estimates by Jonathan Lindenberg, deputy head of investment banking at MUFG in New York, there is currently about $340bn of “available, uncommitted” funding from private infrastructure funds focused on the Americas. That sum includes a possible record $40bn fundraising from Blackstone, the world’s biggest private equity group, which is trying to find investors to match a $20bn pledge from Saudi Arabia’s Public Investment Fund last May.
“The government actions will be important, and will provide a rudder,” said one senior Wall Street banker. “But it’s not an anchor; the anchor is the capital available.”
Analysts said they feared Mr Trump’s plan could be stymied by a combination of fiscal hawks in the Republican party not wanting to support another increase in the national debt, and Democrats not wanting to hand the president a political victory in an election year.
Charles Schumer, the top Democrat in the Senate, said on Monday that the plan’s reliance on private funding would result in “Trump tolls” across the land.
“Wealthy investors and large banks will want projects that generate a profit. How do they get the profit? By charging middle-class Americans hundreds of dollars a year in tolls,” Mr Schumer said. ”The middle class need not ask from whom this bill tolls, it tolls for thee.”
Ed Mills, Washington-based analyst at Raymond James, a mid-sized investment bank, said Republicans could be willing to cut deals to get the plan through in the event of a big sell-off in markets and a weakening in the economy, in what he described as “a break-glass-in-case-of-emergency situation”.
In the meantime, bankers say they are not counting on much help from Washington. David Blatt, chief executive of CapStack Partners, a boutique investment bank in New York, said Monday’s announcement was “tepid”. He noted that Mr Trump had to disband his infrastructure advisory council last summer, after a backlash over his response to violence at a white-nationalist rally.
Earlier this month, Tony James, Blackstone’s president and chief operating officer, told investors that the company did not need “any improved legislation or regulatory system” to invest its new infrastructure fund “really well”.
“Both Republicans and Democrats, no one wins in this ridiculously slow system we have,” he said. “But I think there’s tons to do even without it.”
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