Washington -- House Majority Leader Richard Gephardt has been working with bond dealers on a proposal to establish a federal infrastructure bank that would issue taxable bonds to provide grants to states and localities, a New York City official said yesterday.

Carol O'Cleireacain, the city's commissioner of finanace, said she has been collaborating on the idea with the Missouri Democrat and Felix Rohatyn of Lazard Freres & Co. She described how such an infrastructure bank might work at a meeting of the Infrastructure Investment Commission here yesterday.

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