CHICAGO -- For a bureaucrat, Illinois State Treasurer Patrick Quinn sounds a lot like a banker.
With relative ease, the 44-year-old official discusses credit allocation, cross-selling, and the Community Reinvestment Act.
But make no mistake -- Mr. Quinn is a politician, not a banker. While he understands the fundamentals of the industry, his sympathies are more populist than profit-centered.
He is the de facto ringleader of an increasingly aggressive breed of government treasurer.
No longer content crunching numbers in obscurity, state and local treasurers around the country are leveraging government finances to spur economic development. Central to their cause: the nation's banks.
Through programs that make stable, low-interest government deposits contingent on a bank's making loans, treasurers use financial institutions to stimulate growth -- thus creating jobs and a pleased electorate.
At least 16 state treasuries these so-called linked deposit programs.
Unprecedented Interest
"It's a way to fund programs without putting them into a budget," said Mary Ellen Withrow, the Ohio state treasurer, who is a top contender for U.S. treasurer.
Banking issues have become so important to treasurers that the National Association of State Treasurers in January created the first banking committee in its 17-year history.
Later this month, the treasurers organization is sponsoring a conference devoted specifically to banking. And L. William Seidman, former chairman of the Federal Deposit Insurance Corp., was guest speaker at the group's last convention.
May Run for Governor
This newfound interest has some bankers worried. The treasurer's office has long been considered a way station for budding politicians. And bankers have often taken it on the chin from politicians looking to polish their populist credentials.
Mr. Quinn -- not unlike former Sen. Adlai Stevenson 3d, his predecessor by two decades is "actively considering" a race for higher office, against Republican Gov. Jim Edgar in 1994.
The treasurers of Ohio, Pennsylvania, Louisiana, and California are all considering gubernatorial races. Municipal treasurers across the nation have also used their positions to further political careers.
Exercising His Leverage
"Anyone with a political ambition using the treasury as a stepping stone will use all avenues available to them," said Georgie A. Thomas, New Hampshire treasurer and chairwoman of the state treasurers group's banking committee.
In the Land of Lincoln, Mr. Quinn is known for exercising the treasury's leverage over banks in the name of economic development. Since his election in 1990, Mr. Quinn has introduced more initiatives involving banks and state funds than any of his predecessors.
"I would be very surprised if there was a more active treasurer anywhere in the nation," says Robert Wingert, executive vice president of the Community Bankers Association of Illinois.
The treasurer's office claims 4,000 new jobs have been created by Mr. Quinn's programs over his three-year tenure. Among Mr. Quinn's initiatives:
* Increased use of linked deposit programs to spur banks to loan to otherwise marginal borrowers at lower rates of interest. The treasurer's agriculture linked deposit program, for example, has grown from backing $160 million in loans in 1990, to more than $237 million in 1992, involving 167 banks.
* Smart Money, a program allowing for direct deposit into bank accounts of welfare and government benefits monies. More than 1,900 checking accounts have been opened under this program.
* HomeStart, a joint venture with the Federal National Mortgage Association that has helped finance 4.640 mortgage loans totaling $344 million -- with down payments as low as 3%.
* Bank at school programs linking 100 financial institutions with 200 local schools to educate children in banking and saving.
While bankers have generally offered muted praise for the programs, Mr. Quinn's most recent venture, the "bank lending report card," had many of the state's rural community banks sharpening their farm tools.
The report card, released in June, is a compilation of loan-to-deposit ratios, market share percentages, and CRA ratings for all downstate banks. A report on the rest of the state's banks is in the works.
Banks Object to Measure
The report was widely highlighted in the local media, with many community banks categorized as "not reinvesting" in the local economy based on loan-to-deposit ratios below 60%.
Community bankers objected to the use of the loan-to-deposit ratio as a measure of how much the banks were reinvesting in their local economies.
"It was not only wrong, it was reckless," said Mr. Wingert, the community bankers group official.
Peoples Bank, Bloomington, Ill., felt so strongly that it spent $1,500 for an advertisement in a local paper challenging the report's accuracy. The bank's 50% ratio of loans to deposits put it in the "not reinvesting" category.
Back to School
In the ad, Peoples president Jerry D. Gummere wrote:
"Mr. Treasurer, I take exception to your rating system and would welcome debating banking with you.
"However, I suggest that you enroll in a course entitled |Principles of Banking' and another course, "Asset-Liability Management,' before we have a meeting."
The ad was headlined "Banks Have Enough Regulators."
Mr. Quinn, who said he received an |A' in money and banking at Georgetown University, disputes bankers' claims that consumers and small businesses are reticent to borrow.
"You cannot say that there is no demand out there -- you have to constantly innovate and refine your products to meet consumer needs," he said. "Whenever I hear that, I would invite a financial institution to work with us -- we'll help them create loan demand."
Mr. Quinn sees the report card as a way of educating consumers, and their local legislators, about what banks do for their communities.
"We want people to question bankers, he said. "'Wait a minute, what's the loan to deposit ratio at your bank? How many ag loans are you making out there? Can't you do a little better?'"
Still, community bankers say the study did not take into account larger banks' lending out of state, and the differences in the health of local economies.
"It is the most blatant extrapolation of statistics we have ever seen," said Allen Drake, president of Woodford County Bank, El Paso, Ill.
Says Mr. Quinn: "The banks that came out well in that study didn't complain at all; in fact, they used it to advertise themselves."
Indeed, few of the bankers who have taken advantage of the treasurer's programs are whining.
Calvin Myers, chief executive of Merchants National Bank of Aurora, used linked deposits last year to bring in $10 million of new business.
"From a mercenary standpoint, the programs have been pretty good for us," he said.
Because the treasurer's deposit was locked in for a specific time period, at a lower than market rate, the bank undercut competitors by offering loans at below market rates.
"I'm sure Pat Quinn has a social agenda he thinks can be pursued through the banking industry," said Mr. Myers. "I'm just not sure it's all that bad."
Northern Trust Savors Tootsie Roll Loan Deal
CHICAGO -- Some community bankers find Illinois State Treasurer Patrick Quinn's hybrid of populism and government finance troublesome.
But Chicago heavyweight Northern TrustCorp. and Tootsie Roll Industries knew a good deal when they saw one.
Using the treasurer's Economically Targeted Investment Program, Northern arranged a low-interest loan for the Chicago confectionery.
Ultimatum to Candy Maker
The program is one of a handful of linked deposit programs managed by the treasurer's office. Mr. Quinn makes lower-cost deposits available to banks willing to make low interest loans for housing, to women-owned businesses, recyclers, farmers and small businesses throughout the state.
This summer, the landlord of Tootsie Roll's 2.2 million-square-foot plant on the city's South Side gave the candy company an ultimatum: Buy the plant or move out.
Below-Market Loan
With a $22 million payroll of 800 jobs -- and $50 million in annual purchasing -- at stake in an economically-depressed quarter of the city, Northern knew they would interest Mr. Quinn, whose political ambitions may include a run for the governor's seat.
The bank approached the treasurer with the loan. Within three weeks, Mr. Quinn made a $20 million low interest, time deposit of state monies. Northern made a $20 million, below-market-rate loan to America's leading manufacturer of chewy chocolates.
Tootsie Roll bought the candy factory. The company estimates that the loan will save it $220,000 of interest annually, and plans to add 150 more job to the plant over the next three years.
While Northern retains all of the credit risk, it was able to maintain a profitable spread on the loan. In addition, the bank has established a relationship with the manufacturer from which it can cross-sell its products and services.
But there was a small catch. Reflective of his populist leanings, the treasurer made financing contingent upon Tootsie Roll's promising to assist employees with buying their first home.
Under the terms of the deal, Tootsie Roll is obliged to match contributions up to $100 for any worker opening a savings account under Mr. Quinn's Home Ownership Made Easy program. H.O.M.E. provides state tax breaks for savings accounts targeted to buy a first home.
In addition, the treasurer got commitments from Northern and Tootsie Roll to conduct home buying workshops for employees of the chocolate company.
