A statewide trade group for bankers had a lukewarm reaction to Gov. Mark Dayton's announcement Wednesday of a plan to help spur small business lending.
Dayton said the state will shift as much as $100 million of investment into local banks.
The governor was joined by Howard Bicker, head of the state board of investment, who said the board is shifting some of its money out of low-return treasury bills to certificates of deposit in Minnesota banks.
Bicker said state officials hope the money will get loaned out to small businesses and employers.
"We are providing a lot of money to more smaller institutions that had more trouble attracting capital," Bicker said. "Generally speaking, these smaller institutions are the ones that are providing the loans to the local individual that's trying to start a business. So it's getting money to the area that would really be productive."
Bicker said a hike in FDIC insurance coverage made the shift possible. He said the state's eight pension funds would likely double their existing $750,000 deposits in participating banks.
Dayton admitted the action is only one small step, but said he wants to try everything he can.
"I mean that's how you reemploy 218,000 people. One job, one person at a time," he said. "Those who are off, not seeking work, come back in. Those who are at lower paying jobs go to higher paying jobs."
Dayton said there was no guarantee the money would get into the hands of job creators. But he said community banks have a good prospect of making that happen.
The Minnesota Bankers Association welcomed the plan, but Gerriann Brower, a spokeswoman for the group, said in a statement that "the program does not address low loan demand; liquidity is not the issue."
While businesses complain they can't get loans, banks continue to assert that there isn't enough loan demand from credit-worthy borrowers.
The typical Minnesota bank has experienced a greater drop in loan growth over the past year than the U.S. median and the availability of deposits hasn't changed that picture.
According to the Federal Reserve Bank of Minneapolis, deposits at Minnesota banks have increased 10 percent since the financial crisis in 2008 as both individuals and businesses park more money in banks.