Fink urges privatisation of critical US infrastructure
BlackRock chief emphasises need to harness capital as White House eyes $1tn plan
The US should embark on a sweeping privatisation of critical infrastructure, such as its airports, in order to harness private capital for a major building effort, says the head of the world’s largest asset manager.
Larry Fink, head of BlackRock and one of the chief executives advising the Trump administration, makes the call in his annual letter to BlackRock shareholders, in which he says federal spending cannot fulfil the country’s investment needs.
His intervention comes as the administration considers how to implement President Donald Trump’s campaign pledge of a $1tn infrastructure investment plan, and amid partisan fractures over possible approaches.
“Substantial expertise must be dedicated to bring projects to market in a format appropriate for institutional investment,” Mr Fink says. “These projects must deliver competitive returns and that will often require efficiencies that can only be achieved through private ownership.”
He cites the example of US airports which, in contrast to those in the UK, Australia and other countries, are almost all publicly owned.
“Policymakers, workers and unions must work together to find a model that will allow private enterprise to generate the long-term returns necessary to attract capital and build a more prosperous future,” he says.
BlackRock is advocating for a new form of federally-subsidised bonds to finance the upkeep of existing and new infrastructure. Mr Fink says the old system of funding projects through the issuance of municipal bonds is broken, because state and local governments must instead direct resources to funding large pension deficits.
And he says “budget pressures at the federal level leave little room for Washington to fill the gap”.
Mr Fink is weighing in on a debate that will shape Trump administration policy. The president’s commerce secretary, former private equity investor Wilbur Ross, has advocated for expansive tax credits for equity investors in new infrastructure projects. Elaine Chao, transport secretary, has emphasised how cutting regulations can speed up new construction.
Democrats on Capitol Hill, meanwhile, lean towards tax-funded federal spending as a means of improving the nation’s roads, bridges and airports, and believe they have a potential ally in the White House in Steve Bannon, Mr Trump’s chief strategist.
Infrastructure will be on the agenda of a meeting of chief executives at the White House on Tuesday, as it has been at other recent discussions with representatives of the private sector.
This week’s meeting of the president’s strategic and policy forum — which is led by Blackstone founder Stephen Schwarzman and includes Mr Fink and other executives such as Jamie Dimon of JPMorgan Chase and Ginni Rommety of IBM — is aimed at suggesting policies on the budget and transportation, among other issues.
At a similar meeting of 50 business leaders last week, Gary Cohn, the former Goldman Sachs president who now heads the White House Council of Economic Advisers, raised the possibility of privatising US air traffic control. It would be placed in a non-profit entity funded by public and private finance, he said.