The Role of Public Investment in Catalyzing Private Sector Funding

In this episode, Reed Hundt, the CEO of the Coalition for Green Capital, discusses the merits of green banks, quasi-public or nonprofit institutions that provide seed capital to accelerate the growth of clean energy. There are more than 20 active green banks at the state level. Now Biden has proposed a federal green bank. Hundt explains how it could help.

Full transcript of Volts podcast featuring Reed Hundt, August 13, 2021

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As we speak, Democrats in Congress are at work putting together a budget reconciliation bill that will include enormous swathes of President Biden’s agenda, including his climate agenda.

One of the policies being discussed for inclusion is the creation of a “Clean Energy & Sustainability Accelerator,” more commonly known as a green bank.

The idea of a federal green bank has been floating around forever. There was one in the ill-fated Waxman-Markey climate bill of 2009 (which never made it through the Senate) and there’s been one introduced in Congress virtually every year since.

But this time it might happen! So it’s time to brush up on what a green bank is and what it does.

It would not, contrary to some popular misconceptions, be an agency of the federal government, nor would it finance projects purely with federal money. Rather, it would be an independent, nonprofit entity that uses an initial grant of federal money to pull private capital off the sidelines and into climate-related projects. After the initial grant, the bank would be self-sustaining.

The model has been tested: there are green banks in more than a dozen states, which have generated $5.3 billion in clean energy investment since 2011, including $1.5 billion in 2019 alone. And there are more than 20 states where the process of establishing a green bank has begun.

These state- and city-level green banks are popular and successful, but because states and cities tend to be short on funds, they too often lack the capital needed to fund worthy projects. Right now there are more than $20 billion worth of projects that are eligible for green bank funding and are now waiting. One of the roles of a federal green bank would be to capitalize all those local banks, to get all those projects rolling.

To learn more about green banks, I was happy to talk to their greatest champion: Reed Hundt, the co-founder and CEO of the Coalition for Green Capital. Hundt has been advocating for green banks for over a decade — including seven years on the board of the Connecticut Green Bank — and it is largely through the coalition’s work that the network of state and local green banks has been established.

I was eager to talk with Hundt about how a national green bank would work, the kinds of projects it would fund, how it would account for equity, and the potential if it’s done right, for a green bank to accelerate the clean energy transition.

Reed Hundt, welcome to Volts, thank you for coming.

Reed Hundt:

Thank you very much. I was talking to a friend of mine in Tennessee and he told me that you're from Tennessee. He said that you were the best analyst and commentator about energy issues in the whole state of Tennessee.

David Roberts:

I don't know whether that's damning by faint praise?

Reed Hundt:

Well then I said to my friend, “No, no, the two of you are,” because the person I was talking to was my high school classmate Al Gore.

David Roberts:

Oh, funny! Yes, he and I have bonded over our Tennessee roots before.

I want to talk about green banks with you, but real quick, by way of setting context before that, let’s talk history. Obama faced a similar situation [to the one Biden faces] — different in a lot of ways, similar in some ways. But you wrote a book about Obama's response to the crises he faced that was extremely critical of Obama.

So as we contemplate what Biden should be doing in this similar situation, let's review real quickly, what did Obama do wrong and what does that tell us about how Biden should be approaching this mess?

Reed Hundt:

You're in a very small club, which is the club of people that know about the book called A Crisis Wasted, and as a founding member of the club, I’m very happy to have a new member.

So the problem in 2008-09 was that, as Rahm Emanuel said at the time, a crisis is too good to waste. But all of the advice to the President-elect was small where it should have been big, constrained where it should have been bold, and was short range rather than long range. The people were not badly motivated, but in retrospect and at the time, their counsel was insufficient to meet the needs, not only of the moment, but of the next 10 years. The big difference for the Biden administration, and indeed for the entire Democratic Party in the current year, is the decision from the very beginning of this presidency and of this particular Congress to follow what Larry Summers himself said in 2008: the risks of doing too little are much much worse than the risks of doing too much. 

Larry didn't follow his own advice then, but the entire Democratic Party is taking it to heart now.

The second learning that the Biden people took from the past was not to do just one thing at a time, in sequence, and then run out of time, but to do everything on every front as fast as possible, pressing on every single topic: the democracy agenda, childcare, the COVID relief, climate change, infrastructure. All topics are being pursued in parallel, simultaneously.

The tactical decision of the Obama administration was to do one thing at a time, in sequence. The problem with that is that it played into the hands of opponents who correctly felt that, if they could delay action, ultimately inaction would triumph — entropy would take over.

So the decision made by President-Elect Obama was to do climate change and energy legislation after healthcare, instead of simultaneously. The decision made by this President was to do them together, to do all things together. That's why the reconciliation package includes climate change measures as well as childcare.

So there's two different things: one is go big, and the second is do everything in parallel.

David Roberts:

That strategy is coming to a head with the reconciliation bill, which, indeed, is gigantic and contains just about everything you could think of. It'll be a real interesting historical A-B test if this new strategy does in fact work better.

Reed Hundt:

And it's a test that has to be passed, right? In terms of the role of government in the United States to stop a climate catastrophe, this is the last chance.

David Roberts:

Among the things being proposed for inclusion in the reconciliation bill is a green bank. I've been following this area for a long time and I have heard about green banks, in the background or on the periphery, over and over again. It seems like an evergreen idea that never seems to get over the finish line.

By way of framing this discussion, maybe you can just tell us in the simplest terms, what is a green bank?

Reed Hundt:

A green bank is a publicly funded institution that aims to combine public and private investment to build something. You have to believe that public-private investment is a good thing, or you won't like a green bank.

Public-private investment is how we build all infrastructure, actually, so it shouldn't be too challenging to say, “Let's have public-private investment to build the clean-power platform.”

Let me give you an example of the way that a road is built. A state government or a county government issues a bond; the bond is purchased by the private sector; the private sector then, through the mechanism of the bond, provides the money. And then, overwhelmingly, the state contracts out to the private sector to actually build the road. That's a public-private investment.

The road might not be owned by the private sector, or it could be owned by the private sector, but the ownership is not the point — the point is that it was private money that was pushed through a municipal bond that created a form of financing that built the road.

There are five major infrastructure platforms: sewage, water, transportation, communications, and power. For all five, there is some version of public-private investment.

So point one is, we're talking about public-private investment. Point two is, to contribute the public side of it, let's have a national bank with a network of state and local banks. That's what the green bank idea is.

David Roberts:

One intuitive reaction to this is, if these projects are profitable for private funding and private financiers, what is the role of the public side of this public-private partnership? What is the state doing?

Reed Hundt:

The role is to cause the projects that wouldn’t otherwise happen to occur. They basically fall into three categories, which I call clean up, clear out, and catalyze.

So here's clean up: invest public-private money in neighborhoods and communities where one, carbon energy is not affordable, and two, the byproducts of creating carbon energy are not breathable. That's investment in renovating homes so that they are using rooftop solar or community solar, so that they're insulated effectively. If you do that, in the low- to medium-income households in the United States, the cost of that investment per home will be greater than the income of the household. So somebody else has to provide the money; it has to be the contractor that says, “I'll put up the money and you'll pay me back over time.” That's the shared-savings model.

Well, the private sector does not jump enthusiastically into that activity; it has made almost no headway into that particular market. That market’s potential size in West Virginia alone is more than $40 billion of investment.

David Roberts:

Let's pause here, because I think this confuses some people. There's a big pot of profit, there's a profitable market, there's money to be made. Why isn't private finance already flooding into these areas if there's so much money to be made? What’s the barrier?

Reed Hundt:

In the case of investing in low to medium households, our number one barrier is private sector investors don't know the space. Typically, even though the capital investment per household is twice the median income, that means it's only $80,000. So $80,000 - $90,000 financing, that's beneath the purview of major commercial financiers across the country. So that's the “too small” problem.

Number two, there's the “don't understand” problem, meaning most private sector financiers don't know whether an individual household is a credit risk or not, and because they don't know they don't take the credit risk.

Number three, they have more lucrative activities to engage in, many other more lucrative activities. So they say, “why put the money into an $80,000 upgrade of a household in Marshall County, West Virginia, where the return over time might be in the neighborhood of 4 percent or 5 percent a year. Why do that?”

So it's not that it isn't profitable, it's that it isn't as profitable as investing in Microsoft or a data center or some other high growth activity. Therefore, the role of public investment is to catalyze the private investment to take a little more risk, to aggregate the small financing projects so that they can be sold as a package, to fund small businesses that will actually knock on doors and get people to agree to have the small business do the upgrade.

Those are the primary roles the public part of the investment can play and then the private sector money is pulled in — the goal is to pull the private sector money in.

David Roberts:

Right. So the green bank is in a lot of ways taking on the transaction costs.

Reed Hundt:

Yeah, that's exactly right. That's probably the core point, you just made it.

The “clear out” problem is to clear out the obstacles to massive private sector investment. As you know, a major obstacle in the electricity market is stranded costs, meaning the amount of money that a utility has invested in the old carbon power platform — they need to recover it somehow.

The regulator of the utility says, “well, I have to recover what I invested in the old before I can invest in the new,” but we need them to invest in the new at an accelerated rate in order to stop climate calamity.

So how do you get rid of the stranded cost problem? You have the green bank step in and say, “I'll help you out on the stranded cost,” and then the utility — which in 80-85 percent of the country is a private entity, not a public entity — goes, “oh, well fine, if the stranded cost problem is solved, I'll accelerate the move into the clean-power platform.” That's “clear out” obstacles.

David Roberts:

That sounds more like public grants, just giving them money so that they can clear their plate. Is there some way that that those kinds of things pay themselves back?

Reed Hundt:

Yeah, the technique is called securitization. You basically securitize the stranded cost, and the public entity gets paid back at a slow rate over a fairly long period of time.

David Roberts:

Right. So in this sense, the green bank is providing patience that private capital wouldn't.

Reed Hundt:

Yes, right. You clean up the hard-hit areas, you clear out the obstacles, and then that's how you catalyze the private sector investment. And the net result is that over a 10 year period the accelerator, which is the congressional name for a national climate bank, will pay for itself.

David Roberts:

Right. So this whole idea of a green bank is premised on the idea that markets are not, in fact, perfectly rational, and are, in fact, leaving all sorts of profitable opportunities on the table that they need to be nudged into.

Reed Hundt:

Or you can say that markets are not perfectly efficient. You would think the financial crisis of 2007-2009 proved that point for everybody, right? You’d think that the volatility of Robin Hood would be proving the point to anybody right now, but it's not really disputable that markets are not perfectly efficient at all times in all segments.

The problem, when we talk about the transition from carbon power to clean power, is we can't wait for the markets to figure out how to achieve efficiency, because we've got to get rid of the emissions basically yesterday.

David Roberts:

So we would not be jumping into a national green bank without experience; you and the coalition that you lead have been helping to establish green banks in states and cities for years now. Tell us a little bit about what you've learned from that experience and how they are performing at that level. Are they doing better or worse than you expected?

Reed Hundt:

Better in all respects except one: we haven't been able to attract massive public sector capital.

David Roberts:

That’s because states don't have any right?

Reed Hundt:

That’s the why. Ben Franklin said, “experience keeps a dear school, but a fool will learn in no other,” so I'm the fool.

We presented the idea of a green bank to Larry Summers, Tim Geithner, and Peter Orszag in the 2008-2009 transition, and they said they didn't want to do it, because they prioritized recapitalizing the big Wall Street banks. They didn't want to create a green bank. And also, the economists were suspicious of public-private investment.

David Roberts:

It seems like capitalizing a green bank, relative to the amount of money involved in recapitalizing the big banks, would have been kind of a rounding error. It's not really that much we're talking about, is it?

Reed Hundt:

As it ended up, the money for capitalizing Wall Street, which was appropriated by Congress, was $700 billion, and the Treasury Department did not even use $400 billion of that. They did not even use it.

Davird Roberts:

That would have been a nice green bank seed.

Reed Hundt:

They could have used, I don't know, a fourth of it, an eighth of it, to create a national bank. Or they could have said to one of the big commercial banks, “we'll give you extra capital for you to set up a national climate bank.” They didn't do these things, I think because there was a failure of imagination of disaster.

That's a phrase from Henry James, the novelist. He said, “you need to make sure you have the imagination of disaster.” Not putting too fine a point on it, but disaster is what the IPCC said we are now experiencing with the climate. They just said it. But in 2008, the imagination that would enable anyone to know that by 2021 we would have irreversibly committed to a staggering increase in temperature by human causes … you know, it should have been knowable, but it wasn't knowable. Or if it was knowable, it wasn't acted upon.

However, I would say the idea of the green bank was popular and bipartisan even then. It was passed in the House Energy and Commerce Committee by a 51 to 6 vote, and that means a lot of Republicans voted for it. It was passed out of the Senate Energy and Natural Resources Committee on a bipartisan vote. Senators Bingaman, a Democrat, and Murkowski of Alaska endorsed it. They also endorsed a clean electricity standard.

Neither the green bank nor the clean electricity standard ever got to the floor of the Senate. Had they gotten to the floor of the Senate, they would have passed rather easily. There probably would have been 65 votes. The Democrats accounted for, depending on the week, either 58, 59, or 60 of those votes.

Both those things would have been law. They didn't become law because the Democrats made the perfect the enemy of the good and waited for the cap-and-trade bill that never emerged from committee.

David Roberts:

Oh, I remember. I remember. We couldn't get a federal one back in 2008, so then you dispersed your minions out to the states and cities. Where are the green banks now and what are they doing?

Reed Hundt:

Well, there are 21 of them in 15 states.

David Roberts:

Wait, how's that? Are there multiple ones in some states?

Reed Hundt:

Yeah, Maryland, for example, has three, because the governor vetoed the idea of creating one at the state level. So there's a nonprofit that operates across the state, and then a county-sponsored green bank, and a Baltimore green bank. That's all because Larry Hogan, the governor, wouldn't create a statewide green bank.

In New York, there's two, and kind of on and on it goes through 15 different states. And then there's 22 more states where people are raising their hands saying, “help us create a green bank.” If the Senate budget resolution passes, and if the reconciliation language matches the resolution, then at last we will have the accelerator funded. The very first thing that the accelerator should and would do would be to capitalize green banks in every single state.

David Roberts:

That means establishing them even in states where there currently isn’t one. Is that correct?

Reed Hundt:

We’d go to the governor of Tennessee, we would say, “do you want to create one? Well here's the capital from the federal government, here's the mission that's defined in the statute.” And if the governor said no, we'd ask the legislature. And if the legislature said no, we'd find a nonprofit that would do it.

David Roberts:

So you don't need a government to be involved.

Reed Hundt:

We’d ask them, but if they refused, if they treated it like the vaccine, we then would move to a nonprofit, because look, at the risk of really being simple-minded here, we are all breathing the same air and the same emissions, not just nationally, but globally, and so we can't leave any state out of the conversion from carbon to clean.

David Roberts:

Would the primary function of the federal accelerator be to funnel money through these state entities?

Reed Hundt:

The primary function is to accelerate the transition from carbon to clean, and do it in a way that helps low-income households and creates a lot of jobs and lowers instead of increases prices to the consumer. That’s the mission, and the mission would be pursued primarily through the network of state and local green banks, because most of the solutions would have to be local. Not all, but most.

Here's an example: it would be great to find the incentives that cause heavily driven vehicles to be driven by electric motors. In a national fleet of 200 million plus vehicles, at the most 20 million are truly heavily driven.

The average mileage per year is 15,000 miles — a total of 3 trillion miles for the country. But the heavily driven vehicles are driven 70,000 miles a year, 100,000 miles a year, 150,000 miles a year. You'd want to have an incentive system that would cause them to go electric as soon as possible, because they're relatively small in number and they account for a huge fraction of the emissions.

How would you implement that? You would do that locally. You'd look for the small business person in Memphis, or the fleet that’s operating in Nashville, or the delivery trucks in Knoxville, and you would say, “what does it take to convert you to electric?” You do it locally; you wouldn't say one size fits all.

FedEx is a great example, because they're headquartered in Tennessee, so you would talk to FedEx locally.

David Roberts:

So the federal money would be funneled through the Tennessee-based green bank.

Reed Hundt:

But with a unified mission, not like everybody does whatever they like.

David Roberts:

Are there examples on the non-local side, things that only a federal bank could manage?

Reed Hundt:

We would call them “special strategic situations.” An example would be catalyzing transmission. First of all, almost by definition, transmission always crosses state borders. Consequently, it's not going to be productive to have multiple state green banks cooperate to solve a transmission problem.

David Roberts:

That process is already complicated enough.

Reed Hundt:

It’s complicated enough. A typical obstacle that you'd want to solve in transmission is to be the anchor tenant, the entity that says, “I'll take the product, and I'll pay for the product.” Then all these other people that connect to the transmission line, all the local distribution networks, they all say, “if there's somebody that's guaranteeing the first slice of payment, then I’ll join in and sign up too.”

That's the anchor tenant problem that holds up transmission, and is a fundamental problem for every big infrastructure project of any kind at all. Who's the first user? That's the kind of thing where you'd want to see the national green bank step in and say, “I’ll guarantee that.”

Another example would be a major sea-coast resiliency project that might cross state lines, like between South Carolina and North Carolina. A third example could be (going back to heavily driven vehicles) national fleets, like a rental-car fleet.

Where you have a national or interstate problem, you want the centralized entity to act. And lastly, you want the central entity to be aggregating all of the loans, selling them into the commercial market, and raising new money to recycle the original government investment.

This is important: the way to fund this green bank is one-time. Give it all the money and then never appropriate any money again. Let it recycle that money.

David Roberts:

Is it going to make money, enough to churn more out? How does it fund itself?

Reed Hundt:

If you were an investor, you'd be better off investing in Microsoft or JP Morgan, but the goal, in the aggregate, is to have all the investments be positive. And in fact, over the last 10 years, 99.38 percent of all green bank loans have been profitable.

David Roberts:

Oh, wow!

Reed Hundt:

Not very profitable, but profitable.

David Roberts:

No Solyndra? No failure that gets tied around their necks? Nothing to demagogue here?

Reed Hundt:

Except for 0.62 percent.

David Roberts:

I saw you mention in a different interview that these green banks are not technically banks — they're “mission-driven loan funds.”

Reed Hundt:

They're not deposit-taking banks. Why are they called green banks? I sat in Congressman Van Hollen’s office in January of 2009 and said, “this is what we what we want to do.” He said, “it's a great idea.” I said, “what do you want to call it?” He said, “I want to call it a green bank.” I said, “Congressman, ‘green’ and ‘bank’ are the two most unpopular words you can come up with.” He said, “people will get used to it.”

David Roberts:

Well, “mission-driven loan fund” doesn't exactly trip off the tongue either.

One more technical point about the loans. You make a point of emphasizing that these are not guaranteed. This is not like the DOE loan program, where the loans are backed by the full faith and credit of the federal government. What's that distinction?

Reed Hundt:

Really, really important. This idea of a nonprofit institution is not new. It is the way the government has chosen to achieve goals. In the Corporation for Public Broadcasting, the government chose to have non-commercial broadcast by funding a corporation for public broadcasting. But it didn't want to control it, because it didn't want Sesame Street to become a propaganda agency, right?

The government gives money to the World Bank to accomplish international purposes, but it doesn't guarantee the World Bank's obligations on the US government's balance sheet. There are many other examples of using nonprofits precisely to avoid government control and avoid the government guaranteeing the debt.

A counterexample is Fannie Mae and Freddie Mac, where everybody always knew that in a crisis, the government would guarantee the debt. When the crisis occurred in the summer of 2008, George Bush signed a bill called HERA (wife of Job), saying the government would guarantee the debt of Fannie Mae and Freddie Mac. That's what this isn't.

David Roberts:

This avoids the moral hazard that comes along with that.  

Reed Hundt:

Precisely. By not having the federal government guarantee, it means that the form of financing can be very flexible. It can be convertible debentures, it can be equity, it can be a secondary debt, it can be primary obligations, it can be deferred payments — you can have all kinds of flexibility.

Most importantly, you can have the deposit in the nonprofit be the basis for borrowing and lending, which is exactly what a commercial bank does with its deposits. That's how you get leverage and the reason the accelerator would pay for itself over a decade. It would borrow and re-lend on its on its deposit, which is the public funding.

It would be able to do that enough times over ten years that it would generate enough profit for the private sector that in turn there would be enough tax revenue to pay for the initial deposit.

David Roberts:

A related question: if I'm a listener out there of a conservative bent and I hear about a giant, federally funded institution meant to shovel money out the door, obviously my first concern is, how do you prevent it from becoming a slush fund where politically favored projects get money? What sort of oversight and assurances can we have that this will be independent, and not end up captured?

Reed Hundt:

Well, the uses of the money are defined by the statute that conveys the money. It can't spend on what it isn't authorized to spend on.

Secondly, to have suspenders as well as a belt, the charter of the nonprofit defines what it can do.

Third, it would be more transparent than anything, meaning every quarter — for all the world to see, and everybody in Congress to see, and every reporter to see — all the uses of the money would be disclosed.

Ultimately, as is the case whether you're talking about the Department of Defense or the University of Tennessee or the green bank, you have to trust the people. Nobody should ever think the people don't matter.

David Roberts:

I'm going to get back to that later, but one thing I want to hit before we go on too much longer: you mentioned a couple of times that this is about directing money to low-income projects. For this federal accelerator, would there be some sort of equity screen or equity set-aside? How will it address equity?

Reed Hundt:

The bill that’s been passed in the House of Representatives this year …

David Roberts:

Wait, can we pause there? The bill that was passed in the House — is that the one that’s on the table for reconciliation, as far as you know?

Reed Hundt:

Yes. The drafters of the reconciliation package in the Senate — and they're going to begin work momentarily — will look at the bill that was enacted in the House a few months ago and translate it into reconcilable language.

That language requires that 40 percent of the money benefit low- to medium-income households.

David Roberts:

Got it.

Reed Hundt:

Similarly, any state or local green bank would be obliged to adhere to that requirement.

David Roberts:

Obliged in order to get federal money? Are equity screens built into state banks already? Is that a common thing?

Reed Hundt:

Not already, but if the accelerator is funded, then the accelerator would have a contract with the green bank in Tennessee that said, “this is what you’ve got to do.” So low- to medium-income households — which in Tennessee are all over the state — would necessarily benefit from a minimum of 40 percent of the money.

David Roberts:

Interesting. The obvious example there is upgrading low-income homes with insulation and solar panels. Are there other examples? Do you have favorites?

Reed Hundt:

That's a big example. Another would be: low- to medium-income households, in many cases, have people that use heavily driven vehicles for work. Maybe in a rural area they drive far to find gainful employment. Maybe they're a small business operating out of the house and driving the truck around to work on contracts. That's a good place to replace a heavily driven vehicle with an electric car. And the electric car is going to be cheaper.

The third example is, if you're able to clean up a neighborhood, and the people aren't breathing emissions, the health benefits are real and immediate.

David Roberts:

This is a side topic, but it's one of my personal obsessions: what about the whole cluster of issues around transit and zoning and density? This is a climate topic a lot of people I know are infuriated doesn't get more attention. Is there any way of funneling some of this money to, say, a public transit system or something like that?

Reed Hundt:

I hope and believe the accelerator would complement all the other programs that are going to be in the reconciliation package, or in the bipartisan deal the Senate voted on today. The Department of Transportation, in both of these instruments, is going to have a lot of programs to put into effect that involve public transit. Where there's a missing piece, something the accelerator could pay for to liberate the Department of Transportation's money, that would be a complimentary role to play.

But we have to wait for the legislative smoke to clear to know exactly what has been passed.

David Roberts:

We're all on the edge of our seats over here. When you’re advocating for green banks before legislatures, is there a favorite success story that couldn't have happened without green banks?

Reed Hundt:

There are many. I was on the board of the Connecticut green bank for six years. In the important and interesting category, we electrified a dam in Connecticut. There are thousands of dams that don't generate electricity that could generate electricity. But they're all relatively small-scale. The commercial financiers don't want to get involved; it's a great role for a state and local green bank.

David Roberts:

The coalition requested $100 billion from federal lawmakers as seed funding. As you've emphasized, this would be a one-time grant that gets the thing going. It would be self-sustaining from then on.

I believe in Biden's jobs bill, he proposed $27 billion.

Reed Hundt:

Yeah, that's right.

David Roberts:

Is that enough? Could a bank leverage that up and make it bigger? What’s your take on the level?

Reed Hundt:

You know the story about, if you chained 1,000 lawyers together and threw them to the bottom of the sea, what you would call that?

David Roberts:

Ha, yes, I'm familiar.

Reed Hundt:

A good start. $27 billion would be a good start. $100 billion would be a better start. But we've got to start. We've got to catalyze public-private investment and prove that private sector money can flow into these activities at a far greater rate, quite safely and prudently. That's the goal.

If it's $27 billion, or if it's $100 billion, it'll be enough. We've got to get these green banks going in every state; we can't leave anybody out. More is better, but $27 billion would be a good start.

David Roberts:

This might be a silly question, but is there any upper end? Do you have any sense of the limits of a bank, or limits of the economy to absorb it, or anything like that? How much money could you deal with?

Reed Hundt:

The way to look at this at the macro level is, what is private savings and what is private investment? Ever since the crisis of 2008-09, private savings in the United States have been much higher than private investment. Whether they are pension funds, commercial banks, or high-net-worth individuals, people are sitting on large amounts of cash that is not invested in productive and useful infrastructure.

David Roberts:

What's the reason for that? Are there just not enough investment opportunities?

Reed Hundt:

Yes. Economists sometimes call it “secular stagnation.” They sometimes call it a “savings glut.” Basically, it's fear of the future. Many investors are paid to be fearful, because fearful can be prudent.

We simply have to clear away the obstacles, to mitigate the fear and unlock that private-sector investing. How much? Quite literally, if private investment had equaled private savings since 2009 — which is normally the case in a healthy economy — the economy would be about $5 to $7 trillion bigger.

David Roberts:

Whew.

Reed Hundt:

The carbon-to-clean transition could be and should be the biggest investment opportunity of the century. The increase of wind and solar power from the current market share to the necessary market share is about a 4 to 5X increase in market share. That alone is about a $3 trillion business opportunity.

There's no way public investment should need to or ever would invest that much money. The goal is to catalyze it and to have almost all of it be private money.

David Roberts:

So theoretically, it would be easy to deploy $100 billion.

Reed Hundt:

Oh, very easy.

David Roberts:

A helpful way to think about a green bank is: you've got this giant pool of savings, sitting there with fearful investors, and the role of the green bank is to go before the investors and ease some of these transition costs, set up some of the structures, basically prepare things so that it's easier for private capital to flow into these projects.

Reed Hundt:

And it has to happen quickly, because we don't have a moment to lose in terms of reducing emissions. If we had all the patience in the world, if we had “world enough in time” as the poem says, then 30, 40, 50 years from now the whole world would be based on wind and solar and maybe a little bit of nuclear — because it's cheaper. But we don't have 30, 40, 50 years.

I've been part of this before. When I was FCC Chairman for the Clinton administration in the ‘90s, the question was, how was private investment going to make it possible for you and me to talk via the internet and all these other communications devices that didn't exist then? How were we going to go from wire-line to wireless? How were we going to go from analog to digital? How were we going to go from a long distance phone call to what we're doing now?

The answer is, the government needed to clear out regulatory obstacles, catalyze private sector investment, and encourage the transition, which is what we did. About the same amount of money was spent over 15 years to have the communications industry be completely transformed as we now need to completely transform the energy sector.

David Roberts:

Just a couple of additional political questions. You mentioned that there's transparency, there's oversight, but in the end, you have to trust the people involved in managing this.

As Republicans and Democrats trade control, we've seen policy wildly swing back and forth. We've seen Trump roll back or degrade all kinds of Obama initiatives — green initiatives, regulatory initiatives.

Is there anything you could do to make a green bank resistant to Republicans trying to screw it over or twist it in some way? In Australia, when the conservatives took over, they tried to appropriate green-bank money for fossil fuel projects. Is there any structural or regulatory way to prevent that, or is that just the nature of democratic government?

Reed Hundt:

You have to not put your trust in regulation. Political change changes regulations. You have to trust the integrity and viability of a nonprofit institution. You have to have a bipartisan or nonpartisan board. Let's have the charter and the conditions of funding clearly defined, but then let's trust the people. Let’s say, not that it's more important than politics, but that the vagaries of politics from election to election can't change the purpose. The purpose has to be executed on or we’re cooked. That's why you have to do this.

The idea that there can and should be trustworthy institutions — that's a belief you have to hold to have any success. You have to believe in that, whether they are religious institutions, nonprofits, or other examples of civil society. You have to believe in that and you have to try this one.

David Roberts:

Republicans are all over the place on climate change right now. You think they could be brought around to affirmatively supporting?

Reed Hundt:

State and local green banks, where they exist, draw bipartisan support. As I said, the idea was bipartisan in 2009. The House bill that was passed had Republican co-sponsors. It should be the case that this mission is nonpartisan or bipartisan.

It’s a big country and there's always somebody that doesn't want to do anything, but we don't really have a choice here. We’ve got to try every institutional technique, every technology, every method, because we can't lose the battle against climate catastrophe.

David Roberts:

The green bank is your baby; I assume that's what you’re making calls about and lobbying for. But if that's your number one, what's your number two and three for reconciliation?

Reed Hundt:

For me, this is number one, two, and three. The shoemaker should stick to his last.

I've been doing this for 12 years. The main thing I need to do is summon all of my energy to focus on this one thing and not be distracted.

But I'm not alone. This is a big movement now. We have hundreds of people employed in state green banks already. We run a consortium of green banks; we meet every two weeks and have been for years. We've raised more than $5 billion of private sector money into different projects. We have more than 100 environmental organizations supporting this, we have the president supporting it, the House of Representatives voted for it. I'm not trying to say I'm not involved, I’m trying to say, it ain’t just me.

David Roberts:

As a final question, we started with a little history of how Obama, in your estimation, went too small, thought too small, hedged his bets too much. By way of wrapping up, I'm curious, what is your assessment of Biden and Democrats so far? Does it seem to you like they've taken those lessons to heart? Are they doing what you want them to be doing so far?

Reed Hundt:

Absolutely. The bipartisan bill is an amazing accomplishment. Amazing.

David Roberts:

I don't know why it exists; I can’t explain it.

Reed Hundt:

It can't be gainsayed. What did they get, 19 Republicans or something like that to vote for it?

David Roberts:

Yeah.

Reed Hundt:

It is amazing. The president had the patience, the Democratic leadership had the patience, Republicans were helping and willing. The previous president said “don't vote for it” and 19 of them voted for it.

David Roberts:

And the COVID relief bill, they didn’t go small on that either.

Reed Hundt:

This is a great country. We try pretty much everything else and then we usually get it right. It's just that, right now, we don't have a moment to lose with respect to the climate. That's the reason this thing is called the accelerator.

David Roberts:

All right. Well, thank you for taking so much time.

Reed Hundt:

Thank you, I really admire your work and thanks for talking to me.

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