Clinton's Wild Idea for Bank Fines Makes Perfect Sense

This is the third in a series examining some $65 billion of penalties paid by banks to U.S. regulators over mortgage-related abuses.

NEW YORK ( TheStreet) -- Few people appear to have noticed in November when former U.S. President Bill Clinton proposed using government proceeds from bank fines to build a national infrastructure bank.

"Where's that fine money going?" Clinton said on Nov. 11, when he was a guest speaker at the annual meeting of the Securities Industry and Financial Markets Association (SIFMA), the main trade group for Wall Street giants like JPMorgan Chase  (JPM)  , Bank of America  (BAC) and Goldman Sachs  (GS) . "It should be put into an infrastructure bank to build a new American economy."

The statements, reported by Bloomberg at the time, were especially topical since the U.S. Justice Department was on the verge of announcing a $13 billion settlement with JPMorgan over mortgage fraud, concluding months of negotiations that had been covered exhaustively by the press.

Read More: Florida, Nevada Can't Win for Losing on Mortgage Crisis

Hardly anyone is focused on the Clinton proposal today and even a former senior adviser to Clinton waved away the idea as impractical. Clinton himself wasn't available to speak with TheStreet.

"I doubt if Clinton's proposal will go through and I would be reluctant to support it. Earmarking is not really good fiscal policy and one wonders why are you using financial sector fines to fund infrastructure?" wrote Martin Baily, a Brookings Institution fellow and chairman of the Council of Economic Advisers during the last two and a half years of the Clinton administration, in an email exchange with TheStreet.

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