Mar 10, 2010

Proposal would keep Michigan money IN Michigan to increase lending to small business and help families avoid credit card and college debt.

LANSING – State Senator Buzz Thomas (D-Detroit) and his Michigan Senate Democratic colleagues announced an inventive new proposal today that would establish the Michigan Development Bank. By keeping Michigan residents’ money in Michigan, the proposed bank will redistribute it to generate economic activity and create jobs through increased lending to small business and protect consumers with reasonable interest rates on loans.

“Detroit taxpayers helped bail out big out-of-stateout-of-state banks, but when we need help to start a business or pay for college, they’re nowhere to be found,” said Senator Thomas. “This proposal will take our money and use it in our communities, supporting Michigan businesses, creating Michigan jobs, and helping Michigan families.”

The Michigan Development Bank would be structured like a traditional financial institution, but it would operate differently, with an increased emphasis on economic development rather than profits. The proposal will take money invested by Michigan residents and use it to reinvigorate the economy by offering:

· Small Business Loans to generate economic activity, help companies get off the ground and grow, and create jobs.

· Low Interest Credit Cards to assist struggling consumers with bills and purchases without charging excessive rates that perpetuate a cycle of debt, and allow consumers to roll over current credit card debt to a state credit card.

· Low Interest Student Loans to help Michigan families afford a higher education and limit the overwhelming debt they face following graduation.

· Agricultural Loan Programs to continue to support one of Michigan’s most important industries and help our farmers rebound from this economic crisis.

Senate Democrats propose establishing the Michigan Development Bank with an economic development bond that will have to be approved by the voters. The general rule is that for every $100 deposited, a bank can lend $900. A rough estimate is that with an initial capitalization of $150 million, the Michigan Development Bank could lend up to one billion dollars.

The Senate Democrats’ Michigan Development Bank proposal is patterned after the highly successful Bank of North Dakota. Michigan has been hit hard by the nation’s economic downturn, with the unemployment rate at 14% and a projected state budget deficit of over $1.5 billion. In this current recession, North Dakota has continued to add jobs and balance its budget, primarily because it keeps its money in North Dakota. North Dakota regularly puts between $50 and $60 million back into its General Fund. When you consider that North Dakota’s economy is ten times smaller than Michigan’s, a conservative estimate is that we could generate $500 million for our state’s General Fund.