Nation Looks To North Dakota’s State-Owned Bank As A Model
The banking industry is the source of much consternation nationally, and that’s prompting many to look to North Dakota as a model for government-run banking. North Dakota’s economic success in recent years no doubt adds to the appeal:
Nov. 17 (Bloomberg) — Eric Hardmeyer, chief executive officer of the Bank of North Dakota, said he’s heard from 30 to 40 states asking the same thing: How does the only state-owned bank in the U.S. work?
The financial institution, which opened in 1919 to help North Dakota farmers, has $5 billion in assets and contributed about $340 million in earnings to state coffers in the 12 years through mid-2009.
Lawmakers in other states are modeling proposals on the Bismarck bank as activists protest bailouts for JPMorgan Chase & Co. and other financial giants while their customers struggle with foreclosures and unemployment. Supporters say state-run banks, whose deposit base would include tax revenue and other government funds, would have greater control to develop socially minded lending programs favoring average Americans.
“Because of the Occupy Wall Street movement, there is much more of an interest to put in place state-owned banks to serve the public interest,” Marc Armstrong, the executive director of the Sonoma, California-based Public Banking Institute, said in a telephone interview.
There are a lot of problems with this.
First, the problems in the banking industry nationally have everything to do with government micro-managing banks. We put in place policies to lower lending standards, subsidize loans and promise bailouts and it resulted in the subprime home loan market. A bubble that eventually popped and left us in the predicament we’re in now.
We’re actually verging on the same situation with student loans nationally, where default rates are hitting 40%, and it’s worth noting that the Bank of North Dakota was heavily involved in subsidizing student loans prior to the nationalization of those loans by Obamacare.
To think that the solution to our national banking woes, which again are the result of too much government intervention, are banks managed entirely by the government is a little silly. The problem with banking in America is that the government, through various policies, removed consequences for bad decisions (such as making subprime loans). Banks run privately for profit and without government intervention don’t typically have that problem.
Second, the Bank of North Dakota has very little to do with the state’s current economic success. We have an oil boom that is drawing investment and economic activity to the state which, in turn, has produced a tax revenue bonanza. Our success is circumstantial, not the result of of a government-owned bank or any other political policy for that matter.
We’ve had the bank since 1919, and since the North Dakota has gone through times of prosperity and poverty. Just before our current era of economic strength, North Dakota went through a period in the 1990′s were the economy stagnated and the state had to slash spending due to falling revenues. What help was the Bank of North Dakota then?
Not much.
The best thing I can say about the Bank of North Dakota is that our political leaders, outside of a few areas like student loans, have been smart enough to keep its role in the state economy relatively limited.
Tags: bank of north dakota, North Dakota News
