Illinois Banking Jobs Would be Protected by $1 Billion Investment
Posted on October 16, 2008
Illinois banking jobs, as well as other small business jobs, could be protected by a new proposal to invest money into state banks.
Illinois State Treasurer Alexi Giannoulias recently introduced a plan to invest $1 billion in Illinois state banks, which would provide needed cash for borrowers to help avoid a credit crisis, help level the state during the current financial crisis and make sure jobs stay local.
According to an article by The Associated Press, the money will be made available to interest-bearing bank accounts by shifting it from lower-yielding investments. Making money available to state banks will help keep bank workers employed, as well as help keep those who have taken out loans for their own businesses employed.
“The foundation of healthy local economy is a strong local lender,” Giannoulias said in the article. “We want them to know that the state’s banker has confidence in our local lenders. As soon as we give them the resources and the capital to continue lending, we can keep businesses open and we can keep jobs here in Illinois.”
Participating banks will be required to put up collateral worth as much as 110 percent of the deposit. As part of the plan, any state-chartered or national bank with an Illinois branch will be able to request up to $25 million. As it is expected most banks will only need extra money for a few months, they will be required to repay the money within a year. Major banks included in the federal government’s recent buyout are not eligible.
Under the new plan, state money transfers will be limited to 10 percent of a bank’s total deposits and a bank will not be allowed to have more than $100 million total. The plan would immediately release an initial $500 million and begin to issue increments of the balance on a monthly basis from December through March.
For some officials, the plan seems to lighten the strain on banks that want to continue investing in local communities, and at the same time raises the confidence of depositors.
“Once you lose confidence in a bank and its ability to keep your money safe, you can create a huge domino effect that can really bring a bank down which otherwise would have been able to get through a tough situation,” Leo Harmon, senior director of Chicago-based Fiduciary Management Associates and a member of the treasurer’s external investment advisory board, said in the article.
Illinois officials are hopeful that other states will follow in their lead. So far, state and local governments haven’t come up with any plans of their own to assist banks. However, New Jersey Governor Jon Corzine, recently proposed the state begin to purchase foreclosed homes as part of a broader economic stimulus plan.
“We’re trying to find ways to free up money, free up capital, for Illinois families and businesses who really need to be able to go to their bank and get that capital and also reassure depositors that their money is safe,” Giannoulias added.