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Mon Mar 7, 2016, 12:37 AM

 

I'm still trying to figure out "Leverage money for infrastructure".

Hillary threw that line out there tonight and to me it sounds like she wants to privatize some infrastructure spending. I really don't get it and have no idea where she got that 10 to 1 ratio for leverage.



Can any Clinton supporter explain WTF she was talking about or was this just Hillary babbling incoherently?










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Reply I'm still trying to figure out "Leverage money for infrastructure". (Original post)
Motown_Johnny Mar 2016 OP
edgineered Mar 2016 #1
Motown_Johnny Mar 2016 #4
edgineered Mar 2016 #8
Motown_Johnny Mar 2016 #9
edgineered Mar 2016 #11
Recursion Mar 2016 #2
Motown_Johnny Mar 2016 #3
Lucinda Mar 2016 #5
Motown_Johnny Mar 2016 #6
Lucinda Mar 2016 #7
Motown_Johnny Mar 2016 #10
amborin Mar 2016 #14
BernieforPres2016 Mar 2016 #12
silvershadow Mar 2016 #13
BernieforPres2016 Mar 2016 #15

Response to Motown_Johnny (Original post)

Mon Mar 7, 2016, 12:48 AM

1. Blocker Corporation came up on a search.

This brings back something from studying investments back in the 70's, in particular, Limited Partnerships. Someone else with knowledge can expand on this, but it was at the time that investors would get a leveraged tax advantage on their investment - if the investment failed. Someone investing $100k into a losing deal might receive 5 or 10 times that amount in tax savings. As such these investments were made for the purpose of losing the money but saving much more than that in taxes paid. Anyway, here's a link to something sort of close, and it does have that Clinton feel to it.

https://en.wikipedia.org/wiki/Blocker_corporation

To address these issues, a private equity fund can set up a U.S. feeder corporation known as a blocker corporation. The foreign and tax exempt investors can invest through the blocker corporation, and then they are no longer personally considered to be partners, as it is the foreign corporation that is the owner of equity in the fund. For tax exempt investors, their share of the blocker corporation is considered dividend income, and thus they are not subject to tax.[2] Foreign investors similarly avoid U.S. trade or business income tax (although they will be subject to tax in their home country on any dividends received).[2] The blocker corporation itself is subject, however, to tax on its share of the partnership's income.

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Response to edgineered (Reply #1)

Mon Mar 7, 2016, 01:12 AM

4. So, if someone sinks $100k into a bridge they save a million bucks in taxes?

 

Why does that make any sense at all?

Based on her 10 - 1 ratio, wouldn't it literally be ten times less expensive for the Federal Government to just fix the bridge themselves?


Is this really an economic policy she wants to run on?






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Response to Motown_Johnny (Reply #4)

Mon Mar 7, 2016, 01:44 AM

8. That system of leveraged investments was popular at the time.

In speaking with some CFPs (certified financial planners) lately I was informed that things aren't done that way anymore. Basically maybe 30 or so investors would pool their monies as a limited partnership and buy something like a horse ranch. The red herring would promote the potential for great returns; a nice property, costly horses, the best trainers, etc would certainly generate a triple crown winner (nothing as honest as racing horse?). Others plans might finance investment real estate. Whatever the scheme, what they had in common was the leveraged tax advantage because they were high risk investments. Similar partnerships were formed for things ranging from movie productions to investment diamonds and more. Hopefully someone on this board can give more information, including when these activities were outlawed I had taken a banking, insurance, and real estate cirriculum and found it just wasn't my style.

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Response to edgineered (Reply #8)

Mon Mar 7, 2016, 01:49 AM

9. So her policy proposal is just bat s*%t crazy?

 


It sure looks that way to me.



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Response to Motown_Johnny (Reply #9)

Mon Mar 7, 2016, 01:55 AM

11. Yup, someone (we the taxpayers) will be screwed.

Again.

Glad you've got your eyes open.

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Response to Motown_Johnny (Original post)

Mon Mar 7, 2016, 12:48 AM

2. That generally means using Federal funds to match local funds

So, we'll give Mississippi a million dollars if they'll pitch in a million dollars too to fix I-55 (or whatever, obviously we're talking much bigger amounts generally).

There have also been some pretty successful government matching of private funds for some infrastructure, particularly port facilities and airports; less so for roads and bridges though.

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Response to Recursion (Reply #2)

Mon Mar 7, 2016, 01:08 AM

3. and the 10 - 1 ratio she mentioned?

 



Does she expect Mississippi to pay for 90% of the improvements to their highways and bridges?

Does she expect private industry to pay for 90% of public roads and bridges?


I can see ports and airports.. etc. Places private companies can make money. But it makes no sense at all in the context of the question that was asked. At least none that I can decipher.




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Response to Motown_Johnny (Original post)

Mon Mar 7, 2016, 01:17 AM

5. I think this may be what you are asking about...?

MORE HERE

10 to 1 outlined here:

"...Clinton would increase federal infrastructure funding by $275 billion over a five-year period, fully paying for these investments through business tax reform. Of these funds, she would allocate $250 billion to direct public investment. She would allocate the other $25 billion to a national infrastructure bank, dedicated to advancing our competitive advantage for the 21st century economy. The bank would leverage its $25 billion in funds to support up to an additional $225 billion in direct loans, loan guarantees, and other forms of credit enhancement—meaning that Clinton’s infrastructure plan would in total result in up to $500 billion in federally supported investment. The bank would also administer part of a renewed and expanded Build American Bonds program, and would look for opportunities to work with partners in the private sector to get the best possible outcomes for the American people..."

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Response to Lucinda (Reply #5)

Mon Mar 7, 2016, 01:27 AM

6. But those loans would need to be paid

 

and it is possible that a company could go bankrupt after receiving a guaranteed loan. Bonds are just deficit spending since you need to pay back that loan with interest when the bond matures.

As mentioned in another post, this can make sense for infrastructure that private companies can make money from, such as ports or airports, but really makes no sense at all when it comes to highways and bridges.

Also, is there a price tag on what setting up and running this new bank would be? Would it be a private bank that then charges fees and interest on government loans and bonds?

I appreciate your posting but this still makes absolutely no sense to me. I am really surprised that she is running on, what seems to be, a horrible policy.






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Response to Motown_Johnny (Reply #6)

Mon Mar 7, 2016, 01:35 AM

7. It's all outside my realm of experience.

All I know is that we have huge infrastructure issues that need fixing. I've done zero research on what has been proposed by any of the candidates on this.

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Response to Lucinda (Reply #7)

Mon Mar 7, 2016, 01:51 AM

10. Well she just said it in the debate so I think it is now fair game.

 


It sure looks crazy to me.




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Response to Motown_Johnny (Original post)

Mon Mar 7, 2016, 02:00 AM

12. Thanks for bringing this up

That was another Hillary expression that caught my ear and I meant to post on it (along with "debt free tuition" which I created a thread on).

As somebody else posted, with the we put up $25 billion and leverage it 10 to 1 for $250 billion I am thinking privatization, potentially with government providing cheap loans to hedge funds and other investors for the $225 billion so they can make gigantic returns. Warren Buffett proposed a scheme like that as a way to give private entities the proper incentives and potential gigantic returns to buy distressed assets off the balance sheets of too big to fail banks during the financial meltdown of late 2008 and early 2009.

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Response to Motown_Johnny (Original post)

Mon Mar 7, 2016, 02:01 AM

13. I'm sure she does. Follow the money trail. Pathetic. nt

 

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Response to Motown_Johnny (Original post)

Mon Mar 7, 2016, 02:44 AM

15. Hillary quote on this from the replay

"I want to start a national infrastructure bank. I want to capitalize it with $25 billion that I believe will leverage 10 times that. That's another $250 billion. So I'm trying to do this in a way that will gain support and be affordable."

That has Wall Street and private industry written all over it. Instead of raising taxes to pay for our crumbling infrastructure, create another trough for large campaign donors to feed from.

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