Portland Representative for District 120 Diane Russell has introduced a bill in Augusta titled LD 1452 An Act to create the Maine Street Economic Development Bank. This bill was introduced to the public by Rep. Russell on April 22, 2011. This bill was co-sponsored by fellow Portland Representative Ben Chipman from District 119. There were also 5 other state Reps and Senator Bartlett of Cumberland who co-sponsored this bill.
According to the bill summary this bank will not be created to compete with local banks or credit unions, but to provide another source of funding for small businesses who need a loan that they can not get from other lending institutions.
This bill establishes the Maine Street Economic Development Bank effective July 1, 2013 except that the bank may not make, purchase, guarantee, modify or hold loans until the bank has adequate capital of at least $20,000,000. It specifies the purposes of the bank, establishes a board of directors and creates an advisory committee.
It allows the bank to accept deposits of public funds, to make, purchase, guarantee, modify or hold certain loans and to serve as a custodian bank. It directs the Treasurer of State to deposit money into the bank in an amount the Treasurer of State determines is necessary to allow the bank to fulfill its duties.
Excess income of the bank is deposited in the Maine Budget Stabilization Fund. The bill provides for a quarterly examination by the Department of Professional and Financial Services,Bureau of Financial Institutions and an audit by the State Auditor every 2 years.
The bill directs the Treasurer of State and the Commissioner of Administrative and Financial Services to consult with the Attorney General and report to the Joint Standing Committee on Appropriations and Financial Affairs by January 15, 2012 with recommendations to fully implement the bank. It authorizes the Joint Standing Committee on Appropriations and Financial Affairs to report out a bill to the Second Regular Session of the 125th Legislature.
This bill comes at a time when economic development is at its highest need and consumer confidence is pretty low in the governments ability to help us recover from this recession. It also comes at a time when the state Senate, House and Governor’s office is Republican controlled. One of the promises made by many of these Republicans was to reduce the size of government, but this bill would do exactly the opposite as it creates more jobs funded by the general budget.
This bill creates jobs that are sure to be costly to the public and may not really offer much of a return on the funds invested in these jobs. The jobs created by this bill would cost the public a considerable amount of money at a time when there is already a significant shortfall. Many would argue that they are creating new jobs so it has to be worth it for that reason alone. The bill would create a board of volunteers who would be in charge of hiring a Bank President, officers and other employees. These positions could prove to be costly enough to far outweigh the benefit.
This bill would take a great risk of Public Employee Retirement benefits by investing them in these loans that are going to be, quite often, high risk. This at a time when the Governor has already tried to restructure the Public Employees Retirement plans and extend the retirement age. It does not however give participants in this retirement system the ability to opt out if they do not want their retirement funds risked in this way. It only restricts the retirement system to an “investment” of $20,000,000 of public funds with no responsibility of governance or oversight in the bank. Subsection 1260 even exempts public officials from liability for loss of funds while the funds are deposited in the bank.
It is being touted as the next great business venture of state government since the creation of the State Bank of North Dakota which was created in 1919. However when that bank was created there was a considerable difference in the banking industry and credit unions were none existent. Maine has many different levels of loans available to consumers and businesses alike and has loans available for almost all credit levels.
If this passes it will have an effective date of July 1,2013 except that the Maine Street Economic Development Bank may not make, purchase, modify or hold loans until the bank has adequate capital of at least $20,000,000.