Boston -- During the recession, large banks scaled back on lending and credit for the local businesses and farms that drive the state's job creation and economic growth dried up. In three years, Massachusetts lost 143,000 jobs. Now, a commission appointed by the Massachusetts legislature is considering the creating a state Partnership Bank to boost the local economy by increasing community development lending.
"Putting Massachusetts Money to Work for Massachusetts," a newly released report authored by public policy center Demos, details how Partnership Banks have a proven record of strengthening local community banks, creating jobs, and tilting the economic playing field back toward family farms and small businesses.
While Wall Street banks received taxpayer bailouts and returned to profitability, even increasing their market share, they continued to leave local borrowers out in the cold. Bank of America dramatically slashed their lending to Massachusetts small businesses through the Small Business Administration's flagship 7(a) lending program by 98%, making just six loans in 2010.
These cutbacks have had a disproportionate impact on the Massachusetts economy due to bank consolidation. Four of the five largest banks are chartered out-of-state and control 45% of the state's deposits.
"If the big, bailed-out banks won't get us out of this recession, it's time for us to do it ourselves," said Lewis Finfer of Massachusetts Communities Action Network.
Throughout the recession, only one state — North Dakota — was able to keep its local banks healthy and its local businesses profitable. While Bay Staters struggled to get loans in the recession, the Bank of North Dakota increased its lending by 35%. It did so through the Bank of North Dakota (BND), a state-owned bank that uses the state treasury funds to increase lending through community banks.