The most obvious source of funding for these projects would be for the Federal Reserve to purchase public infrastructure bonds instead of the $40 billion a month of mortgage-backed securities it has been buying. The housing market is important, and keeping mortgage rates low is useful, but investing in public infrastructure is much more important for the nation now. This approach would require a small legislative change to Section 14(b) of the Federal Reserve Act, which currently only allows the Fed to purchase of municipal bonds that mature in six months or less. These infrastructure bonds must be issued with maturities extending from 30 to 50 years, because the assets they fund will last at least that long. In two months, the Fed could buy $80 billion in infrastructure bonds. That would build some very important public infrastructure.

– Can the Port Authority and MTA afford repairs after Sandy?