News Story

State Loans Often Losers

Michigan gubernatorial candidate Virg Bernero was on WJR radio Thursday promoting the idea of a state bank to give select businesses loans to spur the economy.

But in 2009, the Michigan Economic Development Corporation reported that it gave out $29.7 million in loans, with $9.7 million of it being "uncollectible."

The MEDC doesn't expect almost 33 percent of its loans to be repaid last year.

Instead, it will either write off the loan or  take an ownership stake in the project . That way if the project does make money, the MEDC can get its money back.

For example, in 2009 the MEDC stated that it has $2.8 million in life science loans and in that year had written off $800,000 as uncollectable and had taken another $900,000 as investment in the business that took the loan.

"This shows when you start making political motivations in loaning out money, you tend not to collect as much as you loaned out. That is a bad deal for taxpayers," said James Hohman, a policy analyst at the Mackinac Center For Public Policy. "This serves as a warning for the state bank. The state already has some experience making loans and it has not been positive."

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.