State legislators haven’t walked away from the ambitious project of establishing a state-run bank from scratch in Oregon. They’re running away from it. A bill introduced this session by Rep. Bob Jenson (R-Pendleton) calling for a North Dakota-style bank quickly morphed into a compromise proposal for an “Oregon Financing and Credit Authority” backed by Rep. Phil Barnhart (D-Eugene) with support from State Treasurer Ted Wheeler. Business groups such as the Oregon Business Association and Associated Oregon Industries have not yet taken a position on the issue.
The still-evolving compromise proposal calls for consolidating existing programs and funds rather than creating a new state bank. “We’ve spent a lot of time looking at how to use the assets we already have in a more productive way,” says Barnhart. “We could invest some of that money in lending to small businesses to build Oregon’s economy.”
Wheeler, whose role would change radically under a state bank system, says it makes sense to combine the state’s economic development offerings into one office that also participates in loans originated by local banks rather than competing with those banks. “We don’t need to replicate the North Dakota model,” Wheeler says. “I don’t think it would be a good use of public funds, and I don’t think it’s necessary. We can leverage off of the things already in place and achieve the same goals.”
For example, in late January Wheeler’s office reduced collateral requirements for banks that receive public fund deposits from 100% to 75% as a reflection of the improved economy. That freed up an estimated $600 million for local lending without costing taxpayers anything.
Wheeler says improving other existing programs and policies could bring similar results. He has shared his ideas with the bankers association and the Working Families Party, and the ironing out of details is under way.
The end product, should it become law, will probably share little in common with the much-idealized and feared Bank of North Dakota. It will not require the immediate hiring of bankers for state jobs. Nor will it endanger the liquidity of public funds or sap money from the general fund in times of intense cost-cutting. Wheeler, Barnhart and other supporters of the middle way are hoping it will help solve the credit problem without creating a fresh supply of new problems. Time will tell how deep their support reaches in a legislative session already packed with challenges.
Oregon Business writer Peter Beland provided reporting for this article.