LANSING – A state lending program that was to have expired on Friday has been extended for another three months in part because of a sudden interest from state-chartered banks and credit unions – but the state has lent less than one-tenth the $150 million it available for loans.

Some bankers have said the program has not been as competitive as it could be and that most local banks and credit unions have sufficient liquidity to make loans. A banker also said that with the slowing economy, fewer people and businesses are interested in borrowing.

But a spokesperson for the Department of Treasury said the MiCD program has met its goal of making state funds available for loans when market conditions were bad.

The state had announced the lending program in December as a way of helping boost lending in Michigan at what appeared to be the peak of the credit crisis. The program made $150 million available in the state’s common cash through six-month and one-year certificates of deposit to state-chartered banks and credit unions with the proviso that 80 percent of the funds then be lent to individuals or businesses.

The program was to run from December to Friday. Terry Stanton, Treasury spokesperson, said the program would run for another three months.

He said that a total of 11 state chartered banks and three credit unions were participating in the program.

Thus the state had made a total of 16 certificates of deposit available for a total of $3.4 million. Recently, applications for another four CDs had come in, which would mean the state had extended a total of $13.5 million for lending.

Officials with the Michigan Bankers Association said they had not surveyed their members, but that they were unaware of any of the state’s 142 chartered banks or thrifts participating in the program.

Officials with the Michigan Credit Union League said that three of the 340 state chartered credit unions had participated in the program.

At the time the program was announced in December, Governor Jennifer Granholm said in a press release, “This program will pump millions of dollars into communities across the state and offer relief to those hard-working businesses and families that need it.”

The program had been announced a month earlier, but not started for a month as rules and guidelines were prepared. At the time the program was announced a general collapse in lending was reported across the nation, as banks and other lenders pulled back from making loans despite billions of dollars being pumped into the system by the federal government and other states.

Analysts said that having watched the real estate market collapse under the weight of foreclosures (Michigan has one of the highest rates of foreclosures across the country) and people unable to refinance their mortgages because housing values were now less than their original loans, as well as a growing crisis in commercial lending, lenders were simply refusing to make loans.

And the lack of lending was being blamed in large part for the sudden, catastrophic decline in the national economy. Top executives of the United States’ largest automakers, when they sought federal assistance, blamed the credit crisis in part for the fall off in car sales.

But while the state took the action to make funds available for loans in an attempt to help the economy, executives with the local banking industry said their banks and credit unions may not have needed the funds for lending.

They also complained that the state program was not as competitive a source of funds as were other sources of funds.

The demand for loans has been less in some circumstances, one banker said, in large part because people are worried about the economy and whether they would have jobs to repay loans.

The state was making available the money from its common cash fund to banks and credit unions. The CDs the state was making available would have ranged from $100,000 to $10 million. The CDs were to be for either six months or one-year.

Doug Chaffin with Monroe Bank & Trust said banks could access funds from other sources at as much as 25 to 50 basis points cheaper than what the state was offering. The state CDs were being offered at 1.75 percent for six months and 2 percent for one year.

Chaffin also said that some bankers worried that the short time frame of the CDs would not support loans that would be made for three years.

Plus, given the economy, Chaffin said, “Frankly, demand is down” for loans.

Michael Bridges with the Credit Union League, however, said his members still report fairly good business on loans, especially auto loans. “Throughout this economic storm, credit unions are doing very strongly,” he said. “Lending is up.”

While only a small portion of the funds made available has been distributed, Stanton said the overall credit markets have stabilized somewhat since the crisis mode of late fall. The MiCD program has succeeded in providing funds if requested and applied for, he said.

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