LANSING -Department of Treasury officials on Monday announced they would move $150 million of the state’s common cash into commercial banks and credit unions, available for lending, by purchasing certificates of deposit through state banks.

The program, called the Michigan CD Stimulus Program, began Monday and will run through February 6, 2009. Under the program the state will purchase a six-month or 12-month CD for amounts ranging from $100,000 to $10 million.

Those financial institutions will then be asked to “make a concerted effort to prudently lend up to 80 percent of the funds to Michigan businesses and consumers.”

Governor Jennifer Granholm announced the concept of the plan last month, saying it would be a way for the state to help boost the economy. In recent months, businesses have complained that a credit crunch has hurt them, both in terms of their own ability to borrow as well as their customers’ ability to borrow, in terms of basic business operations such as covering payroll as well as expanding operations.

Unlike the federal financial bailout that seems to have failed to stimulate borrowing by banks and other financial institutions, Granholm said a provision calling for banks and other lenders to actually lend the money the state provides will help the economy.

“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,” Granholm said in a release accompanying the announcement.

To further boost the ability of banks to lend the money, the state will take interest on the CDs at less than current market value. The state will get 2.5 percent interest on 12-month CDs and 2.25 percent interest on six-month CDs.

According to the financial website, Bankrate.com, 12-month CDs are averaging 3.26 percent interest and six-month CDs are paying an average of 2.78 percent. The lower rate the state will receive will improve the odds of banks making money on the loans made and allow them to lend the state funds at slightly lower rates as well.

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