Community Banking Districts can create a Lending Pool for Local Businesses

One of the largest obstacles to a robust recovery in the post-Great Recession world is access to capital for aspiring small businesses. Unfortunately, affordable and reliable credit has continued to be difficult to find. One solution is to steer public resources to the types of local financial institutions that could begin making these loans in earnest. The idea is to create community banking districts, where participating local banks would get the business of holding state funds in exchange for commitments to increase their local lending. It is an idea we have supported in California and other places.

Today, a friend and colleague, Jason Judd, makes the case in the Baltimore Sun for creating these districts in his (and my) state of Maryland. He argues that the Maryland legislature should pass the Lend Local Act, which has the potential to get some needed capital flowing to local and small businesses. He writes:

A 2010 analysis from the nonpartisan Center for State Innovation demonstrates that every $10 million moved from large, out-of-state banks to our community banks will help create up to 11 new Maryland jobs. Moving $150 million in short-term deposits — a tiny percentage of Maryland’s short-term funds — can help us create hundreds of new jobs in the next few years.

Local businesses need local banking.