Socialism in North Dakota

Published on People’s World, by John Case, May 14 2010.

The Bank of North Dakota is the only state-owned bank in America. Despite that, or because of it, the bank earned a record profit last year even as its private-sector corollaries lost billions.

Some who have difficulty even absorbing news of a profitable socialist enterprise point to North Dakota’s well-insulated economy, which is heavy on agricultural staples and light on housing speculation, as the source of its success … //

… They also provide a dividend back to the state. The Bank of North Dakota stands to make somewhere north of $60 million this year, and will turn over about half of the profits back to the state general fund. And so over the last 12 years, a third of a billion dollars has been returned to the general fund to offset taxes and to aid in funding public sector needs. 

The State of North Dakota does not have any funding issues at all. In fact they are dealing with the largest surplus ever. North Dakota state bank deposits are not insured by the FDIC, but by “the people of North Dakota”. Yet the bank has never been a bank that tries to hit home runs. It has a specific mission that is more important. For most corporations and banks, their top priority is to maximize shareholder return. The Bank of North Dakota does have a nice return – a return on net operating assets of 2 percent; a return on equity of 26 percent. But the mission of making sure the needs of the state are met comes first – being able to finance those types of investments that make the state go forward.

When the act that established the North Dakota state bank was enacted, all public corporations in the state were also required to deposit their funds in the bank. However a ballot initiative the same year eliminated that requirement, though not without a big struggle over the issue. Though initially conceived by Nonpartisan League founders as a credit union style institution to free the farmers from predatory lenders, the bank’s functions were partially neutered by the time of its inception by the business-backed “Independent Voters Association.” The recall of NPL Gov. Lynn Frazier in 1921 effectively ended the initial plan, with the bank taking a more conservative central banking role in state finance.

The current president and CEO is Eric Hardemeyer. The bank is managed by the North Dakota Industrial Commission, which is composed of the governor, attorney general, and the agriculture commissioner (formerly the agriculture and labor commissioner) of North Dakota.

Can a “state bank” play a positive role in current struggles for jobs and sustainable recovery? The answer must be YES – although the emergence of such banks must be linked directly to the kinds of investments each state needs to move forward. (full text).

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