North Dakota's State-Owned Local Bank Becomes National Model

  - complete article link

(AP) The Bank of North Dakota - the nation's only state-owned bank - might seem to be a relic.

But now officials in other states are wondering if it is helping North Dakota sail through the national recession.

Gubernatorial candidates in Florida and Oregon and a Washington state legislator are advocating the creation of state-owned banks in those states. A report prepared for a Vermont House committee last month said the idea had "considerable merit." 

"There's a lot of hurt out there, a lot of states that are in trouble, and they're tying the Bank of North Dakota together with this economic success that we're having right now," said the bank's president, Eric Hardmeyer.

The Bank of North Dakota serves as an economic development agency and "banker's bank" that lessens the loan risks of private banks and helps them finance larger projects. It offers cheap loans to farmers, students and businesses.

The bank had almost $4 billion in assets and a $2.67 billion loan portfolio at the end of last year, according to its most recent quarterly financial report. It made $58.1 million in profits in 2009, setting a record for the sixth straight year. During the last decade, the bank funneled almost $300 million in profits to North Dakota's treasury.

The bank has the advantage of being the repository for most state funds, which can be used for loans and occasional relief for private banks that need a jolt of cash during sluggish credit markets.

"We think of ourselves as kind of a little mini-Federal Reserve," Hardmeyer said.

The state earns roughly 0.25 percent less interest than state agencies would get from a commercial institution. The bank also pays no state or federal taxes and has no deposit insurance; North Dakota taxpayers are on the hook for any losses.

Bollingberg said the idea of other state-owned banks would also likely rouse opposition from private banks that wanted to keep their share of state deposits. "Because the (Bank of North Dakota) has been here so long, no banks know what it was like to have those deposits," he said.

Hardmeyer said he, too, was always doubtful others would take up North Dakota's model, but now he's not so sure.

"When I see what's going on around the country, it's not quite as far a leap as I thought it once was," he said.  - complete article link

The public Bank of North Dakota operates like traditional private commercial banks; they create money through loans if they maintain the appropriate "capital" and "leverage" ratios.  They have a large captive depositor and business partner, the State itself.  Interest rates are very low to help stimulate commerce and Instead of charging interest for profit; they help reduce the State tax burden.

Detractors might remind us that there still remains the exponential growth of interest debt problem - an economy that cannot be sustained.  That's true, but on the plus side, it helps financially decouple States from the central, Federal government.  More importantly, it reduces our dependence on the international banking cartel.  What if they decided to drastically contract our money supply?  The extortion thugs have already threatened disruptions on several occasions.

While the public Bank of North Dakota has been a big success, the potential of State owned and/or chartered banks can go a lot further.  For example, the Minnesota Transportation Act would enable chartered banks to lend interest and debt free money for approved projects.  Money is created as a ledger asset rather than debt, so there is no repayment.

Interest free loans could also be issued for investment programs that reduce energy consumption, provide sustainable alternatives and promote local commerce.

We can't afford to trust or put all our eggs in the private Federal governBank basket.  We should push hard for State solutions.  Your voice is louder and the politicians are closer.

Larry