You're short on cash. Local businesses are short on cash. But you probably didn't know that even your local bank is short on cash. What's wrong with this picture? Fat-cat bankers on Wall Street are holding all the cards, and all the money, when it comes to restarting the American economy. They get bailouts, while small banks — who actually understand their communities — get bought.
It's time for us to take matters into our own hands. But sure enough, the big banks mobilize their lobbyists to kill any effort to actually do so. And so, after billions in bailouts and tax breaks (and no new significant regulations that might prevent them from taking down the global economy again), the banks keep winning while regular people and small businesses lose.
The backlash is growing, and despite a recent setback here in Maine, the push continues: to take control of our economy from corporate suits and put it back into the hands of local bankers, who profit when Mainers succeed. After all, we eat local, we buy local, we staycation, we brag about Maine's brand — so why do we place so much of our money in the hands of decidedly un-local financiers?
Starting — and stopping — a state bank
Last month, the state legislature's Committee on Insurance and Financial Services voted "Ought Not To Pass" (a/k/a, "we don't like this idea") on LD 1452, "An Act to Create the Maine Street Economic Development Bank." The proposal called for the creation of a state bank — a government institution, staffed by professional bankers (as opposed to economic policy wonks) that would serve as a depository for state revenue (much of which is currently deposited into out-of-state banks), and then use that money in partnership with community banks to loan money to small businesses in the state.
"It's an unfamiliar idea," admits Cliff Ginn, co-director of Opportunity Maine, a local advocacy organization that supported the bill. "But once we get across the basic idea — that all this money that is sitting in bank accounts with Wall Street banks could be put to better use — people understand."
Here's a simple breakdown: Proponents claimed that the banking bill, which was sponsored by Democratic Portland representative Diane Russell, would have generated more business for small banks, more (and bigger, with looser terms) loans for small businesses, and more revenue for state coffers. The only losers, they said, would have been the big banks, who would no longer benefit from state-revenue deposits.
Some supporters called it "a banker's bank" — individuals would not be able to make deposits here. Instead, the bank would work with community banks and credit unions to circulate more money through participation loans (wherein a local bank would effectively split a loan with the state bank) and loan guarantees. The Maine Street Bank would expand local banks' lending capacity, i.e., how much money they have to give out.
And that's what small businesses in Maine need, says Nate Libby, director of the Maine Small Business Association. At the end of last year, that organization surveyed more than 100 of its 2500 members (small businesses that had previously expressed interest in being active in the MSBA) and found that "since the recession, a number of our members have noted that their access to credit has been made more difficult, their credit line has been reduced, their payback terms have been shortened."