Bankers are making plans to finance any projects that could come from infrastructure improvements.
The Biden administration’s $2 trillion proposal would improve the nation’s aging roads and bridges and invest in a number of projects that include schools and affordable housing.
While any final legislation hinges on Congress, and Republicans have already voiced concerns about the plan’s substantial corporate tax increase, banks have begun drafting marketing materials and exploring new products to give commercial borrowers with financial flexibility should government contracts become available.
“It could provide that one extra jolt we may need to climb out of this pandemic quickly,” said Laurie Stewart, president and CEO of the $861 million-asset Sound Financial in Seattle.
Stewart said she is interested in the plan’s potential to bolster the nation’s low housing inventory.
“Anything we can do to address housing affordability would be big,” Stewart said. “That’s a huge issue. First-time buyers are essentially priced out of a lot of markets.”
MVB Financial in Fairmont, W.Va., will track the proposed legislation closely and prepare financing options for clients who expect a surge in construction if a bill passes, said Larry Mazza, the $2.3 billion-asset company’s president and CEO.
“When you throw that kind of money out there, there’s no question construction would boom,” Mazza said. “We definitely need infrastructure improvement all over the U.S. It’s critical.”
The proposal certainly faces an uphill battle of being passed in its entirety because the program would be supported by raising the corporate tax rate from 21% to 28%, industry observers said.
While Republicans are unlikely to support anything with a tax hike, Brian Gardner, chief Washington policy analyst at Stifel Financial, said Democratic control of Congress means that “some form of this bill is likely to pass.”
Democrats would have to pass the bill using complex budget reconciliation rules. A vote is unlikely before the summer and may get pushed to later, industry obervers said.
“There will be a lag,” said Claude Hanley, a partner at Capital Performance Group. “I think this is a 2022 story” for banks.
Several lenders expressed concern about the tax hike, along with the sheer size of the spending proposal.
Raising taxes during a pandemic is “not a good idea,” even if the hike is delayed until 2022, said Matt Selke, CEO of the $82 million-asset Pinnacle Credit Union in Atlanta. Selke expressed concerns that higher taxes could dampen corporate investment and hiring.
But investment in infrastructure is “long overdue,” Selke said, adding that he would be on the lookout for opportunities to lend to small businesses that land contracts.
Key elements of the plan include about $620 billion for transportation…