In an effort to keep credit flowing here in the Nutmeg state Gov. M. Jodi Rell announced a plan Thursday, which will have the state guarantee loans made by community banks to small businesses.
After a meeting with 40 community banking leaders at the Connecticut Convention Center, Rell emerged with a five point plan to keep the state’s economy flowing. The last part of the plan would have each of the community banks contribute $1 million apiece to a lending pool for small businesses, the pool could include more than $40 million if all the banks participate.
Banking Commissioner Howard Pitkin said the state would guarantee a portion of those loans.
“There are many credit worthy borrowers that may be under strain based on the economic circumstances today, who therefore, may not qualify according to the standard underwriting guidelines of banks,” James Smith, chairman and chief executive officer of Webster Bank, said. He said the banks want to work with the state to identify who those businesses are and make sure they have access to credit.
Rell’s plan also calls for the Department of Economic and Community Development to allocate $5 million to provide low-interest loans to small businesses with 50 or fewer employees and expands by $10 million an existing loan guarantee program for businesses with 50 to 200 employees.
In addition Rell said she will shift $5 million in Urban Act bond funding to boost brownfield remediation projects tied directly to job creation and ask the legislature to extend the Bond Anticipation Note program so municipalities can extend short-term lending.
Gerald Noonan, president of the Connecticut Bankers Association, said community banks did not make subprime loans and hold only about 35 percent of the mortgages in the state. He said the other 65 percent are held by larger national banks.
William McGurk, president and chief executive officer of Rockville Bank, said his bank has not foreclosed on any of its mortgages.
Peyton Patterson, president and chief executive officer of New Alliance Bank, said the community banks in the state see the current financial crisis as an opportunity. “Community banks are quite healthy” she said. “We believe there’s an opportunity here in deposit gathering.”