The Bank of North Dakota: Banking Profiles - Brightwork Research & Analysis

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Executive Summary

The Bank of North Dakota is the only state bank left in the US.
The Bank of North Dakota is a model for other states to follow.

Introduction

This is the only state-owned bank in the US. A model of other public banks uses it by Ellen Brown. The history of the BND is explained at this link.

The other state-owned banks (Alabama, Kentucky, Illinois, Vermont, Georgia, Tennessee, Missouri, Virginia’s) were eliminated due to political pressure by private banking interests. Other states have analyzed the BND for whether they should open their own state banks. State banks could work seamlessly with a US government public central bank. The BND has a single branch and has most likely survived because it has not attempted to compete with private banks or expand. The BND is virtually never mentioned in articles about banking, even though it has been a stability and ag glowing success model. Ellen Brown is the only prominent author to bring up the existence of this bank. Ellen Brown states the following about the BND.

“The BND maximizes its profits and its ability to serve the community by eliminating profiteering middlemen. It has no private shareholders bent on short-term profits, no high-paid executives, no need to advertise for depositors or borrowers, and no need for multiple branches. It has a massive built-in deposit base since the state’s revenues must be deposited in the BND by law. It does not compete with North Dakota’s local banks in the retail market but instead partners with them. The local bank services and retains the customer, while the BND helps as needed with capital and liquidity. Largely due to this amicable relationship, North Dakota has nearly six times as many local financial institutions per person as the country overall. Its emergency capabilities were demonstrated in 1997 when record flooding and fires devastated Grand Forks, North Dakota. East Grand Forks on the Minnesota side of the Red River, the town and its sister city, lay in ruins. The response of the BND was immediate and comprehensive, demonstrating financial flexibility and public generosity that no privately-owned bank could match. The BND quickly established nearly $70 million in credit lines and launched a disaster relief loan program; worked closely with federal agencies to gain forbearance on federally-backed home loans and student loans; and reduced interest rates on existing family farm and farm operating programs. In the 2020 crisis, North Dakota shone again, leading the nation in getting funds into the hands of workers and small businesses. Unemployment benefits were distributed in North Dakota faster than in any other state, and small businesses secured more Payroll Protection Program funds per worker than in any other state.” – Ellen Brown

Source: Ellen Brown

https://ellenbrown.com/2021/03/04/will-2021-be-public-bankings-watershed-moment/#more-15314

Other States Studying the BND for the Potential to Start Their Own Banks

The state of Massachusetts performed a study into creating a state bank investigating the BND. Here is one quote from that study.

“Members of the North Dakota banking community initially feared that a state owned bank would drive small businesses. To soothe these concerns, the North Dakota legislature imposes limits on BND activities. The bank was initially prohibited from opening branches, engaging in retail banking, and providing commercial lending other than farm real estate loans. BND has shown a profit each year, according to data available since 1971. In fact, BDN has consistently produced high returns on its assets compared to size private banks similarly. This could indicate that BND, on average, is more successful in its lending and investments than its private sector peers, has a lower cost of funds or operations, or benefits from its tax exempt status or some combination thereof. BND accounts for about 15 percent of total deposits of banks with operations in North Dakota — more than any other bank in the state. In the past five years, BND saw similar shares of its loans fall into delinquency than comparably sized banks across the nation. BND deposits are backed by the full faith and credit of the state of North Dakota and are not insured by the FDIC. As the nation’s unemployment rate hovered near 10 percent in late 2009, North Dakota’s unemployment rate stayed below 4.5 percent. Some policymakers in other parts of the nation have summarized that North Dakota’s relatively benign surmised that North Dakota’s relatively benign recession might be attributable in part of the existence of a state-owned bank.”

Source: Politico

https://www.politico.com/states/f/?id=0000015b-5330-d932-a97b-f3fc404f0001

At the end of the study, the authors point out the expense of creating a state bank. This is amusing or sad because the authors did not understand the costs a state incurs by not having a state bank. Having a state bank allows a state to place all tax revenues into that bank and keep away from private banks and Wall Street. This point, as well as the math, is explained by Ellen Brown in the following video.

The state of Vermont performed a similar.

Here is one quote

“What might the rewards be of Vermont owning and operating its own bank? An examination of the Bank of North Dakota’s audited financial statements reveals that it transferred $30MM to the North Dakota General Fund in 2006, 2007, and 2008. Expressed as a percentage, it cost the Bank of North Dakota 3 tenths of one percent of their loan assets from a salary and benefits perspective to originate and service their loans. It appears at least theoretically possible to create an entity that operates far less expensively and at a profit and therefore is able to pay a dividend to the state each year rather than the reverse whereby the state needs to appropriate funds for these organizations on a regular ongoing basis.”

Source: VTDigger

https://vtdigger.org/2010/01/25/expert-testimony-should-vermont-form-a-state-owned-bank/