People Get Ready: Private Profit and The Greater Good

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Can you feel it? Start humming The Impressions 1965 classic, and read on.

“People get ready, there’s a train a comin’”

During my 23-year Wall St career, muni bonds and money markets were known as the staid and steady-eddy divisions of investment banks. We underwrote, sold and traded debt securities to the investor public. This non-exotic system of finance provided cash liquidity to municipalities (and utilities, corporations), which ultimately flushed the toilets and turned on the lights for everyone. Considered a low-risk profit generator, the investment banks nobly served the greater good, with only periodic news flashes of sticky fingers scheming an extra buck.

Sounds almost George Bailey-ian, but my memory is pretty clear. And so is my conscience.

Infrastructure has surged in possibility since 8 November. Suddenly, red and blue politicians are pontificating the need to rebuild the American crumble, the disgusting and feckless 8-year GOP obstruction notwithstanding. NYT journalists Danielle Ivory, Ben Protess and Griff Palmer wrote a great article, “In American Towns, Private Profits From Public Works,” and I highly suggest a thorough reading.

“You don’t need no baggage, just get on board.”

The 20-year estimates for infrastructure spending range from $600 billion to $1 trillion. Those numbers undoubtedly attract the big players of finance, including private equity. Now I believe in the capital markets. I believe in the kinds of investments that support job creation, build things, and deliver results other than the mathematically engineered. We have two sides to an equation that could possibly generate a mutually beneficial outcome.

“All you need is faith to hear the diesels hummin’”

Problems to this money supply vs. municipal need ratio can and do develop. Most often it’s a very human condition that causes difficulty. Greed vs. Trust. On the one hand are the motivations of the money providers. The insatiable demand for profit is typically hard-wired into the brain of a financier. More is better, so always get more. Our system of law promotes and protects this for-profit behavior. Buyer beware, believe me! On the other hand, municipalities struggle under the weight of faulty planning, insufficient revenue streams, and century-old water mains. And the chances are low that a municipal manager has the financial savvy to understand the finely-tuned language and long-term ramifications of a deal. It’s easier to trust the man or woman in the pinstriped suit, kind of like clicking “Accept” to the terms and conditions of any software upgrade.

“You don’t need no ticket you just thank the Lord.”

Granted, new infrastructure is a positive result. But at what cost, and to whom goes the weighty bulk of these costs? The “C.O.D.B.” often reveals itself years later. Some people (the dealmakers) make a lot of money, and move on to the next deal. And some people (Joe taxpayer) will be foreclosed upon for missing a $500 quarterly payment to the private company managing their water treatment plant.

“The greater good” takes a backseat to short-term profit making in today’s capital markets. It’s the sharks vs. the guppies, the American way. And beginning 20 January 2017, it’s the Trump-ian way. Watch out, losers! #theDTs train is rolling into town.

But I say, DO NOT GIVE UP! The fight is on and awareness is the key. Hope lies in a variety of corners of the financial world. The best example is the premise of the Beneficial Corporation, or “B Corp,” which is a growing platform of companies that adhere to a strictly monitored triple bottom line: generate profit, benefit the environment and create positive social impact. Imagine the possibilities!

‘Nuff Said.

Photo Credit: https://goo.gl/images/ylOKGp

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