The Tappan Zee Bridge Replacement as Proxy for Bureacracy

Here’s a sobering City Journal (love the pub and iPad app!) article on the state of the “The Tappan Zee Is Falling Down” – the replacement of the Tappan Zee Bridge crossing the Hudson River and connecting Westchester and Rockland County New York.

The Tappan Zee exemplifies the state of America’s infrastructure in 2011. We rely on it more than ever: each year, 51 million cars, trucks, and buses traverse the seven-lane “Tap,” as locals call it. More people commute over it than through the Lincoln or the Holland Tunnel, both of which cross the river to the south. Yet New York outgrew the bridge decades ago, with today’s traffic far exceeding the structure’s designed capacity. Worse, the Tappan Zee is a disaster in slow motion.

The bridge has several decades too old and undergoes continuous renovations. I thought the stimulus package would accelerate construction of roads and bridges but alas, the process is bogged down by the same federal government that brought us the stimulus package.

Its a key regional asset that impacts the economy and as an extension, the housing market.

Bridge naming: Tappan Indian tribe, + Dutch word for “sea”.

View the original article here

[Hybrid Redux Proposal] Zandi’s Fannie-Freddie Public-Private Replacement

One of the things that annoys me about talking heads (self-included on occasion) is there is a lot of kvetching provided but not many solutions offered. Mark Zandi, the noted economist and recent guest on my podcast has come up with a possible solution for the glimmer twins Fannie/Freddie (the former GSEs):

Mortgage rates could be one percentage point higher and house prices 10% lower if the U.S. mortgage market were fully privatized, according to a paper to be released Tuesday by Mark Zandi, chief economist at Moody’s Analytics.

The calculations help build Mr. Zandi’s case for replacing Fannie Mae and Freddie Mac with new entities constituting a public-private hybrid system for financing home loans.

Wait, isn’t this a repeat of the past?

The problem before was that the GSEs served two masters: Taxpayer AND Shareholder. The shareholder enjoyed an unfair advantage since the taxpayer was the backstop that allowed higher risk taking that ultimately brought the GSEs down.

But Zandi contends that a completely private entity will not work because investors will assume that the government would step in if there was a problem. I agree with him. A purely private solution ignores this reality.

Solution?

MBICs (mortgage bond insurance companies) who would securitize packages of bank loans and sell them.

View the original article here