No Socialist-leaning Governor For Michigan

The last thing we need in Michigan is for the government to takeover private industry by creating a State-owned bank. In a word, I find government intrusion into free enterprise "nauseating".

I could only imagine the problems that would come from this socialist-leaning plan. If the State of Michigan owns the bank, will it make loans based on political leanings? Will it award loans after financial campaign contributions? Will the bank demand the employees of companies seeking a loan belong to a union? I can see an house of corruption we do not need to build.

See the March 10,2010 article below:

Candidate for governor Virg Bernero proposes state-owned bank to ease credit crunch
By Chris Knape | The Grand Rapids Press
March 10, 2010, 6:47AM

Bernero saying Michigan's businesses are being left behind by big banks, Democrat gubernatorial candidate and Lansing Mayor Virg Bernero announced a plan Tuesday to create a state-owned bank to serve as a lending "backstop" and help ease a credit crunch.

The plan would mimic the state-owned Bank of North Dakota, which works with banks in that state to help finance business growth efforts, provide student loans and offer other banking services. Rather than being backed by the Federal Deposit Insurance Corp. -- and subject to its regulations -- the bank is backed by the state.

"We can't wait on Wall Street and Washington for our recovery," Bernero said. "The big banks have been saved, meanwhile small business in Michigan is being snuffed out."

Bernero's proposal calls for the bank to be capitalized with the assets of the state and a bond sale.

Whether the proposal gets legs, helps Bernero get his name out to voters who have never heard of him, or gets him labeled a socialist remains to be seen.

FACT SHEET
Lansing Mayor Virg Bernero, Democrat candidate for governor, proposed establishing a state-owned bank to help ease credit markets and encourage business growth. Here's a look at the Bank of North Dakota, which he wants to model the Michigan bank after:
Founded: 1919

Total assets (2009): $3.9 billion

Net income: $58 million

Insured by: State of North Dakota (not FDIC)

Governed by: State Industrial Commission, consisting of the governor, attorney general and North Dakota commissioner of agriculture; a seven-member advisory board appointed by governor

Don Mann, regulatory liaison for the Michigan Association of Community Bankers, said he has "grave concerns" about the government getting into the banking business, but the idea deserves more study and his group has not taken a position on the idea.

"We shouldn't shoot and say, 'That's not going to work,'" Mann said. "We have to have more dialogue from both sides. But the government being in the banking business to me is a scary prospect, especially after taking over auto companies and big banks."

Art Johnson, chief executive officer of United Bank in Grand Rapids and chairman of the American Bankers Association, said he's skeptical that Michigan could quickly and successfully clone North Dakota's success.

Since its state bank has been around since 1919, North Dakota has had plenty of time to ramp up and develop a track record, he said.

"It has the benefit of getting itself capitalized over a great deal of time, having a long learning experience, not having to go out and staff the thing overnight and get started in a tough economy," Johnson said.

He also said he was concerned the bank could be used for political purposes by whatever party is in control of state government.

The state-owned bank has been a boon to North Dakota but might be tough for others to replicate. Rick Clayburgh, president of the North Dakota Bankers Association, said residents organized the bank (and a state-owned grain elevator and mill) in defiance of big out-of-state banks and mill operators that were hindering its farmers early in the 20th century.

"Over the years, it has developed into a very good tool for the state as well as for the industry," he said. "The bank does not necessarily compete directly but works with banks and credit unions."

As an example, he said, the state bank might help finance a project too large for smaller banks to pull off or it might, at the Legislature's behest, provide more loans to programs like those to encourage new farmers. The bank also is profitable, contributing about $60 million to the state's general fund every two years.

Clayburgh said his biggest reservation about bringing the concept to a state like Michigan would be starting during a downturn.

"If a state were going to go down this path, it really needs to be done in good times to ensure it becomes well capitalized and gets off to good start," he said.

Unlike Michigan, North Dakota is slated to run an almost $1 billion budget surplus this year, he said. As a major farming and energy-producing state with a very small population, North Dakota has eluded many of the recessionary problems hampering other states, he said.

E-mail Chris Knape: cknape@grpress.com