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Impact of the Bank of North Dakota (Graphs)

| Written by Stacy Mitchell | 8 Comments | Updated on Apr 7, 2011 The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/charts-bank-north-dakota/

North Dakota is the only state so far that has established a publicly owned bank.   Founded in 1919, the Bank of North Dakota has a mission to “promote agriculture, commerce, and industry” and “be helpful to and assist in the development of… financial institutions… within the State.”

BND functions primarily as a “banker’s bank,” providing loan participation and other support to local banks.

Thanks in large part to BND, community banks are much more robust in North Dakota than in other states.

Learn more about the history, structure, and impact of the Bank of North Dakota.

 

 

 

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About Stacy Mitchell

Stacy Mitchell is a senior researcher with the Institute for Local Self-Reliance, where she directs initiatives on independent business and community banking. She is the author of Big-Box Swindle and also produces a popular monthly newsletter, the Hometown Advantage Bulletin.  Connect with her on twitter and catch her recent TEDx Talk: Why We Can’t Shop Our Way to a Better Economy. More

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8 Comments

Tom Hagan said...

As shown in this excellent collection of charts, local banks are thriving in North Dakota.

There is another story that needs to be told about North Dakota, more directly concerning the workings of its publicly owned bank.

In addition to promoting the growth of community banks, the Bank of North Dakota directly saves the citizens of the state a ton of money. It does this by using normal deposits from the state to fund loans the bank makes, largely through other local private banks in the state.

Interest from those loans, which elsewhere leaves the state on a one-way trip to big Wall Street banks, instead stays in the state. The interest money flowing back to the Bank of North Dakota flows ultimately back into the state treasury, greatly relieving its budget.

The BND has worked out its partnershjip arrangements with local banks in the state over many years. So local banks can fund many more projects than they otherwise could, and they can be more selective in picking projects that benefit the economy of the state.

But any state can get off the ground quickly and benefit almost immediately from establishing a state-owned bank by using its early deposits to buy up already outstanding municipal bonds issued in the state. Its like throwing a gigantic switch: tax money now collected to pay interest on those bonds instead of being sent off to Wall Street is suddenly diverted to flow into the bank and stay in the state.

Result: infrastructure costs are almost halved, because the long term debt used to finance infrastructire improvements – bridges, schools, etc. – results in interest payments that add up to about half the total money paid back to bond holders. When the state is the bondholder, it collects that interest, so it saves about half the cost it has been paying for infrastructure.

Who can be against that? Schools, roads and bridges, at half price to the taxpayer! The only folks who don’t like this are the Wall Street bankers. Local bankers favor the whole idea – they are supporters of the publicly-owned Bank of North Dakota.

Apr 14, 2011

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