The committee charged with studying a Massachusetts-run bank almost unanimously recommended the Bay State should not form a public bank – calling it, in the words of one member, "a solution looking for a problem."
The idea of a state-operated bank has been championed by Senate President Therese Murray since 2009, when she suggested Massachusetts should put its deposits in a new, publicly operated institution that would spur lending for businesses and other hard-to-finance projects. The economic prosperity of North Dakota, the only other state with such an entity, has been cited as evidence that a bank would be a positive step for Massachusetts, as well.
The committee, comprised largely of bankers and nonprofit heads, has held multiple hearings to gather testimony and review reports on the subject – and they weren’t convinced. A vote at the committee’s last scheduled meeting on Tuesday afternoon came back overwhelmingly negative, with two abstentions.
Many of the bankers on the board, including Peter Anderson, CEO of Rockport National Bank, said he still didn’t believe the state had a serious deficit of credit for worthy businesses. Various members also pointed out that dozens of quasi-public and public agencies already provide funding for hard-to-bank businesses and projects. If those agencies fail to grant approval, it seems likely the business itself is not creditworthy and shouldn’t get funding in the first place – not a promising way to deploy taxpayer money, members agreed.
The only dissent came from Joe Kriesberg, president and CEO of the Massachusetts Association of Community Development Corporations, and Doreen Treacy, director of DotWell Civic Health Institute, both of whom abstained from the final vote. These organization heads hesitated to weigh in officially, saying the committee needed more information to analyze one issue in particular – namely, whether a public entity should step in to help with the state’s infrastructure projects.
They argued that, because the committee’s meetings had focused strongly on small business lending, it gave short shrift to whether the state could be aided by a new financing mechanism for infrastructure – an idea the committee largely agreed needed more attention in a different setting.
Other representatives from the nonprofit sector, including Thomas Gleason from MassHousing, added their voices to the opposition. It’s possible there is a group of underserved, worthy potential borrowers out there – but forming a massive entity such as this would be largely unnecessary, Gleason noted. Nancy Howard, COO of MassDevelopment, added that the efforts have "consistently felt like a solution looking for a problem."
A previous report on the project from the Federal Reserve Bank of Boston analyzed the North Dakota state bank in comparison with Massachusetts, and concluded that starting such a bank here would take $3.6 billion to capitalize.
