Senate Democrats Propose Developing a Bank to Create Jobs, Grow Small Business and Protect Michigan Consumers

Proposal would keep Michigan money IN Michigan to lower credit card rates, increase small business loans, and offer financial assistance for college students

LANSING – Michigan Senate Democrats unveiled an innovative proposal today that would create the Michigan Development Bank. The proposed bank will keep residents’ money in Michigan and put it to work to stimulate the economy and create jobs through increased business lending and protect consumers with reasonable interest rates on loans.

“Michigan’s economy has been suffering and working families in the state have had difficulty keeping up with credit card bills, college tuition prices and mortgage payments,” said Senate Democratic Leader Mike Prusi (D-Ishpeming). “Establishing the Michigan Development Bank will keep our hard-earned dollars right here in the state to invest in small business, create good-paying jobs to get people back to work, and help protect the middle class.”

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.

“Investing in the state’s economy is the greatest way to create jobs, and this proposal will provide small businesses and entrepreneurs the funding they need to invest and grow,” said Senator Gretchen Whitmer (D-East Lansing). “Our economy has stagnated due in part to stale thinking in Lansing, and this is just the type of innovative idea we need to create real economic change, using our own money to rebuild the state.”

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.

“With the current state of our economy, every dollar counts, yet we’re depositing our money in other people’s pockets by investing in big corporate banks without seeing much lending in return,” said Senator Hansen Clarke (D-Detroit). “It’s time for the Mitten State to lend itself a helping hand and establish a bank that is willing to invest in our small businesses and offer the financial support necessary to see job growth.”

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.

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