Illinois may kick Wall Street to the curb

By Adam Doster /Progress Illinois


After the imprudent and possibly illegal behavior of America's largest banks sent the nation into a deep recession and necessitated a massive bailout at taxpayers' expense, Wall Street firms have rebounded nicely.

In the first quarter of 2010, JPMorgan Chase, Bank of America, and CitiGroup have all posted sizeable profits.
The same can't be said for many businesses on the South Side of Chicago, where financing is hard to come by and unemployment is staggeringly high. Residents fighting for their homes aren't getting much assistance either, as banks spend more of their time fighting sensible foreclosure prevention bills than refinancing home loans. "A lot of people are angry and upset," said Rep. Mary Flowers (D-Chicago) in an interview last week. "The people of the state don't feel like we've gotten much of anything out of the deal."

Responding to the frustration in her district, which covers chunks of the city's Southwest Side, Flowers recently asked the General Assembly's Legislative Research Unit to explore ways in which the state could simultaneously spur lending and lessen its reliance on the bloated financial sector. The result: House Bill 5476, legislation to establish the Community Bank of Illinois.

The idea is modeled after the Bank of North Dakota (BND) the only state-run bank in America and one that has been operating successfully since 1919. The institution has a seven-member advisory board, 168 full-time employees, and is regulated by the state's Industrial Commission. While it offers few retail options, it does extend low-interest loans to students, farmers, and small businesses often overlooked by traditional banks. The BND also provides liquidity to other financial institutions in the state and enables "participation loans" (in which it originates the loan while a partnering bank contributes funds and shares in the risk and profits).