This piece was originally presented by steering committee member Steve Snyder as testimony in support of the Massachusetts Infrastructure Bank bill when it was first filed in 2017. The coronavirus makes the ability of public banks to ease crisis-caused economic disruptions especially relevant now.
As a chartered bank owned by the State and People of Massachusetts, the Massachusetts Infrastructure Bank is mandated to serve the needs of its citizens through its loan program. Disaster relief and public health emergencies are now occurring with increased frequency and they must be responded to quickly in order to save lives, preserve communities and businesses, and maintain our vital infrastructure. Institutions, strategies, IT infrastructure, and personnel plans are in place, but the bottleneck is in funding that is responsive, adequate, and sustained.
A state-owned bank can also respond rapidly and flexibly because its profits do not have to be maximized in the short-term to serve absentee shareholders. As a public institution, it can effectively coordinate with the local public safety, media, hospital, business, finance and insurance sectors as well as other state and federal agencies
The 1997 Red River Flood inundated both Grand Forks ND and East Grand Forks MN. The public Bank of North Dakota’s rapid response was key to Grand Forks’s recovery
The consequences of a rapid response are clear in the following example. During the Grand Forks flood in the spring of 1997, the state-owned bank of North Dakota quickly established nearly $70 million in credit lines for the state Division of Emergency Management, the state National Guard, the City of Grand Forks and its state university, and the rebuilding of a key dike. The Bank of North Dakota also worked with local financial institutions and foundations to raise and coordinate relief funds both for Grand Forks and other areas affected by spring floods. Further, BND negotiated forbearance on student loans and housing loans backed by the federal government. It also reduced interest costs for farmers.
The flood inundated 75% of homes, impacted five thousand businesses, and necessitated the evacuation of 50,000 people. Throughout the months of recovery the Bank of North Dakota tirelessly supported its citizens. As a result, Grand Forks lost just 3% of its population between 1997 and 2000. By contrast East Grand Forks across the river in Minnesota lost 17% of its population during the same period.
Having ready credit for saving lives and rebuilding meant that the community of Grand Forks and its tax base were largely preserved.
Massachusetts needs a state-owned infrastructure bank that can provide credit to rebuild our communities in the event of a disaster and support shared economic prosperity. For this reason, in addition to the improved safety and profitability of our State’s deposits, we urge you to support creation of a public Massachusetts Infrastructure Bank.