OK, the economy may be tanking, but it could be worse. We could actually have a state-owned and funded bank – yes our very own Bank of Massachusetts – running amuck right now.
Fortunately, Beacon Hill won’t be jumping into the banking business, at least this year anyway, with a special commission that included some level-headed business players having roundly rejected the idea.
Still, the fact the idea was even given serious consideration is troubling enough.
The Evergreen Solar meltdown should be evidence enough that government bureaucrats make bad bankers. Nor does it take a sleuth to figure out that such a bank would be akin to red meat in front of a tiger in a place as corrupt as Massachusetts.
And don’t think this is the last we’ve heard of it, with one key state senator vowing to keep pushing the idea.
“I cannot support the conclusion” to dismiss the idea of a state bank, wrote State Sen. Karen Spilka, D-Ashland, who sat on the commission and co-chairs the Joint Committee on Economic Development and Emerging Technologies. “We should further evaluate whether a state-owned bank that is modeled on the commonwealth’s needs would work for Massachusetts.”
Fortunately, some of the area’s top business leaders from organizations like the Associated Industries of Massachusetts and the Smaller Business Association of New England had the final say.
The only state right now to have its own bank is North Dakota, the commission notes. And for obvious reasons, what works in North Dakota is unlikely to provide much of a model for a complicated, high-tech, industrial state like Massachusetts.
Then there is the little question of start-up capital – as much as $3.6 billion.
Making matters worse, our newly launched state bank would likely be pursuing riskier investments, putting that badly needed money at risk, the commission’s report finds.
The Heart Of The Matter
Now these are all fine objections, but they don’t really get to the heart of the matter. So let’s cast aside political correctness and get to the heart of the matter in a way that the commission, even if it wanted to, could not.
First off, to launch a state-owned bank in a state as corrupt as Massachusetts would be a disaster waiting to happen.
The recent trial of former House speaker, and now convicted felon, Sal DiMasi amply demonstrated the temptations run-of-the-mill state contracts can hold for those in power.
Even as he was thundering on about the evils of casino gambling, DiMasi created an elaborate scheme to steer a multimillion-dollar software contract in exchange for generous kickbacks.
Just imagine the allure, then, that a state-owned bank stuffed with billions in taxpayer dollars might have on a future DiMasi? It would make the Cognos deal look like child’s play.
Soon we would be reading about relatives, friends and business associates pulling down sweetheart loans from the newly minted Bank of Massachusetts. Nor does it take too much imagination to foresee stories about killer mortgages landing in the laps of key lawmakers and former lawmakers pulling down hefty pay packages as executives or board members.
But for arguments sake, let’s say all the typical suspects on Beacon Hill are now laying low after watching the latest House speaker trot off to spend several years in Club Fed.
We would still be confronted with the other fatal flaw of this scheme – ambitious politicians pushing risky loans to fashionable businesses with questionable bottom lines.
The Evergreen fiasco was a prime example.
The green-obsessed Patrick administration pumped up the trendy solar power manufacturer with tens of millions in credits and loans, only to see Evergreen bail for China. Bye-bye, all that state money. An even bigger disaster is now playing out on the national stage, with the Obama administration having blown another half billion backing another shaky solar panel manufacturer, Solyndra.
Yes, more than a few banks have become far too cautious when it comes to business lending and could use a good kick in the pants to get moving. That said, for bankers, assessing risk can be a delicate balancing act.
And when your boss is the governor and political ambition is mixed into the loan approval process, the results, as we have seen, can be downright disastrous.
The recent trial of former House speaker, and now convicted felon, Sal DiMasi amply demonstrated the temptations run-of-the-mill state contracts can hold for those in power.
Even as he was thundering on about the evils of casino gambling, DiMasi created an elaborate scheme to steer a multimillion-dollar software contract in exchange for generous kickbacks.
Just imagine the allure, then, that a state-owned bank stuffed with billions in taxpayer dollars might have on a future DiMasi? It would make the Cognos deal look like child’s play.
Soon we would be reading about relatives, friends and business associates pulling down sweetheart loans from the newly minted Bank of Massachusetts. Nor does it take too much imagination to foresee stories about killer mortgages landing in the laps of key lawmakers and former lawmakers pulling down hefty pay packages as executives or board members.
But for arguments sake, let’s say all the typical suspects on Beacon Hill are now laying low after watching the latest House speaker trot off to spend several years in Club Fed.
We would still be confronted with the other fatal flaw of this scheme – ambitious politicians pushing risky loans to fashionable businesses with questionable bottom lines.
The Evergreen fiasco was a prime example.
The green-obsessed Patrick administration pumped up the trendy solar power manufacturer with tens of millions in credits and loans, only to see Evergreen bail for China. Bye-bye, all that state money. An even bigger disaster is now playing out on the national stage, with the Obama administration having blown another half billion backing another shaky solar panel manufacturer, Solyndra.
Yes, more than a few banks have become far too cautious when it comes to business lending and could use a good kick in the pants to get moving. That said, for bankers, assessing risk can be a delicate balancing act.
And when your boss is the governor and political ambition is mixed into the loan approval process, the results, as we have seen, can be downright disastrous.
