Treasurer Seeks Lending Boost For Business | Banks to pledge lending in exchange for deposits
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State Treasurer Steven Grossman.
State Treasurer Steven Grossman is cashing in a campaign promise to move $100 million of the state’s short-term deposits to Massachusetts banks that promise to increase their lending to small businesses.
The treasurer’s Move Money program is aimed at spurring small business lending in Massachusetts, specifically in Worcester and other Gateway Cities — former mill towns targeted by the state for economic development.
The impact that the program will have on the economy is uncertain.
Many banks in Massachusetts currently have money to lend, according to Daniel Forte, president of the Massachusetts Bankers Association, who is working with Grossman’s office on the program.
The problem for some, Forte said, is lower demand for loans from recession-weary businesses.
But that’s not to say all banks are in that position.
Grossman said that he is confident there will be more than enough interest from banks to get the program going.
“We’re going to start with $100 million but that amount is flexible,” Grossman said. “It can grow and I expect that it will grow.”
Seeding Development
Grossman has been in discussions with banks across the state about the program, and said that local banks are seeing an uptick in loan demand, taking market share in some cases from larger competitors.
“I think they’re being fast, flexible and entrepreneurial in competing with bigger banks,” he said.
Forte, of the bankers association, said that moving state deposits that are in out-of-state banks to Massachusetts-based regional and local banks is a positive step that keeps the money local and could help businesses expand and create jobs.
One bank reporting money to lend is Worcester-based Commerce Bank. President Brian Thompson noted that Commerce increased its commercial loans by 15 percent last year, loaning more than $100 million.
“At this point in time, the industry has a lot of liquidity,” Thompson said.
But Commerce will still consider participating in the program once all of the details are finalized, Thompson said.
Thompson spoke positively of the program’s intentions and said that he plans to meet in early March with Grossman and Worcester officials to discuss the details.
In its initial phase, the Move Money program would shift $100 million of the state’s more than $7.5 billion in short-term cash deposits to at least 20 banks that agree to increase their small business lending. Grossman said he is capping the amount an individual bank can receive at $5 million because he wants to spread the money around the state.
Banks that sign a one-year memorandum of understanding with the state would agree to lend the money and publicize and promote the program.
Massachusetts Lending Up
Nationwide, small business lending decreased by $43 billion, or 6.2 percent, in fiscal year 2011 compared to fiscal year 2010, according to the Small Business Administration.
But that wasn’t the story in Massachusetts, where small business loans increased 12.2 percent to a total of $9.8 billion over the same period, according to SBA data released this month.
“Massachusetts banks have done very well in this recession,” Forte said.
But nonetheless, Forte said that moving state funds back into Massachusetts banks, even if it is just a sliver of the overall deposits the state keeps in various accounts across the country, is not to be overlooked.
“The whole point of this program is to move money back to Massachusetts banks so they can be put to use for economic development and quite frankly for small business loans,” Forte said.
As treasurer, Grossman has an obligation to seek a good return on the state’s money, but Forte said that he hopes the state can achieve returns and boost economic activity by moving some money to local, community and regional Massachusetts banks.
“I think compared to what they’re doing now in investing money in New York City, it has to be better,” Forte said.
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