How the Nation’s Only State-Owned Bank Became the Envy of Wall Street

[Rajiv]

How the Nation’s Only State-Owned Bank Became the Envy of Wall Street

The Bank of North Dakota is the only state-owned bank in America—what Republicans might call an idiosyncratic bastion of socialism. It also earned a record profit last year even as its private-sector corollaries lost billions. To be sure, it owes some of its unusual success to North Dakota’s well-insulated economy, which is heavy on agricultural staples and light on housing speculation. But that hasn’t stopped out-of-state politicos from beating a path to chilly Bismarck in search of advice. Could opening state-owned banks across America get us out of the financial crisis? It certainly might help, says Ellen Brown, author of the book, Web of Debt, who writes that the Bank of North Dakota, with its $4 billion under management, has avoided the credit freeze by “creating its own credit, leading the nation in establishing state economic sovereignty.” Mother Jones spoke with the Bank of North Dakota’s president, Eric Hardmeyer.
Mother Jones: How was the bank formed?

Eric Hardmeyer: It was created 90 years ago, in 1919, as a populist movement swept the northern plains. Basically it was a very angry movement by a large group of the agrarian sector that was upset by decisions that were being made in the eastern markets, the money markets maybe in Minneapolis, New York, deciding who got credit and how to market their goods. So it swept the northern plains. In North Dakota the movement was called the Nonpartisan League, and they actually took control of the legislature and created what was called an industrial program, which created both the Bank of North Dakota as a financing arm and a state-owned mill and elevator to market and buy the grain from the farmer. And we’re both in existence today doing exactly what we were created for 90 years ago. Only we’ve morphed a little bit and found other niches and ways to promote the state of North Dakota.

MJ: What makes your bank unique today?

EH: Our funding model, our deposit model is really what is unique as the engine that drives that bank. And that is we are the depository for all state tax collections and fees. And so we have a captive deposit base, we pay a competitive rate to the state treasurer. And I would bet that that would be one of the most difficult things to wrestle away from the private sector—those opportunities to bid on public funds.
But that’s only one portion of it. We take those funds and then, really what separates us is that we plow those deposits back into the state of North Dakota in the form of loans. We invest back into the state in economic development type of activities. We grow our state through that mechanism.

MJ: Clearly other banks also invest their deposits. Is the difference that you are investing a larger portion of that money into the state’s own economy?

EH: Yeah, absolutely. But we have specifically designed programs to spur certain elements of the economy. Whether it’s agriculture or economic development programs that are deemed necessary in the state or energy, which now seems to be a huge play in the state. And education—we do a lot of student loan financing. So that’s our model. We have a specific mission that was given to us when we were created 90 years ago and it guides us throughout our history.
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[Thailandnotes]

Re: How the Nation’s Only State-Owned Bank Became the Envy of Wall Street

Many local banks are doing just fine.

Probably going to move my money out of my brokerage account into to my local bank which has recently been mentioned on CNN and NPR.

Burke and Herbert...Alexandria, Virginia


http://wamu.org/news/09/02/23.php

"Despite Economic Turmoil, Local Bank Thrives"

While many banks across the country are being bailed out, Burke and Herbert Bank is having its best year ever.

The bank was founded in Old Town Alexandria in 1852. Last year, despite all the turmoil in the banking industry, Burke and Herbert posted record profits.

Gerald Hanweck, a George Mason University finance professor who studies the local economy, says the bank avoids risky investing during boom times.

"They're fairly conservative in terms of their investments," he says.

Hunt Burke is the president of the bank. He says when other banks were reaping windfall profits, Burke and Herbert stood by and watched.

"In recent years we've watched other banks fly past us, laughing all the way and making lots of money," Burke says. "And we wondered what was going to be the ultimate result of that. The ultimate result was that we've done very well and we're in a nice, conservative position and can be profitable."

[cjppjc]

Re: How the Nation’s Only State-Owned Bank Became the Envy of Wall Street

Good for them. A modern day Tortoise and the Hare.

[chr5648]

Re: How the Nation’s Only State-Owned Bank Became the Envy of Wall Street

2 comments.

1) I highly doubt wall street is envying them, GS is probably trying to figure out how to buy off the politicians and put a few managing directors inside the bank to get at those surplus funds. Some cdo's or fancy products should do the trick.

2) I would also stop short of calling it socialism. It does not seem to be redistributing wealth but more so being a part of the 'local' community, on the other hand the fed and .gov = Socialism (emphasis on capital S)