Economic Update: Public Service v. Private Profit [CLIP]


Is the idea of a public bank a fantasy, a
utopian dream, something in the distant future, or is it something that exists in
the world today, exists perhaps in the United States today, something we can
point to and say we already have an example, a history, an empirical record of
what’s been going on? And I mean this is a rhetorical question, you know and I
know that the answer is yes we have examples, so let’s start with the one
here in the United States that gets all the attention, once you learn about this,
which is the Bank of North Dakota, tell us a little bit about it. Right, so the
Bank of North Dakota is the only currently operating public bank in the
United States. It’s very successful, it was found in 1919, at the time banks were
foreclosing on mass on farms in North Dakota, mainly banks located in
Minneapolis, and the farmers of North Dakota got together, and they started
what they called the nonpartisan League, which was a sort of not right or left
movement, but really a localist, stay out of our state kind of movement, saying we
want to keep our money here, and we want to make sure our farmers and our banks
are thriving, and not out of state banks. They captured both houses of the
legislature in the following election, and immediately created a state-owned
grain mill and elevator, and the public bank, the Bank of North Dakota. They
amended the Constitution in North Dakota to require that all state revenues and
accounts be held at the bank, guaranteeing at a deposit base, and they
put it in chart. they put in charge of the bank the Industrial Council or
committee, which consists of the Governor, the Attorney General, and the Agriculture
Commissioner of the state. They then proceeded to make loans to farmers, some
of them at competitive interest rates, and others at discounted rates. They did
have some trouble. North Dakota, I mean they kept the money yes inside the state.
Yes, and this is a principle of almost all public banks, is that they’re very
regionally focused, in fact they’re designed to avoid competition with each
other and also commercial banks, and the Bank of North Dakota is a great
example of that, because they have one branch and have zero ATMs, and that’s one
way that they keep costs very low, but they also partner with community banks,
and Community Development funds, those kinds of things, in order to service your
sort of retail customers and business customers. One of the major benefits
of that is that North Dakota has the best community banking industry out of
all the other states in the United States. There are more banks per capita,
and those banks perform much better than community banks in other states, and part
of that is because the Bank of North Dakota acts as sort of a mini Fed, right,
it extends credit to these banks, it allows them repo credit right so your
after-hours banking transfers in order to make sure the balance sheets all
match up, they guarantee loans, they buy loans on a
secondary market in order to increase the liquidity of local banks, and that
independent spirit insulated them from a lot of the turmoil in Wall Street. They
survived the credit crunch of 2009, they’re currently thriving, despite an
oil bust in that state. They’ve returned over a billion dollars in profits to the
taxpayers in North Dakota over the last 20 years, it’s a per capita of about
thirty five hundred dollars per taxpayer, that they got in free services that they
didn’t have to pay taxes for.

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