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Bank of North Dakota: A Compelling Case for Nationalization?
Minyanville ^ | 31 Mar 2009 | Scott Reeves

Posted on 03/31/2009 10:20:03 AM PDT by BGHater

There’s been a bit of ballyhoo lately about the Bank of North Dakota, the only state-owned bank in the United States.

It was created about 90 years ago as part of the populist resistance in the Upper Midwest to New York bankers making decisions on who got farm loans.

But the Bank of North Dakota isn’t a model for the creation of government-run banks to save us from the horror of Citigroup (C), Bank of America (BAC) or JPMorgan Chase’s (JPM) takeover of Washington Mutual.

Here’s why:

North Dakota’s population is about 640,000 and it’s hard to see how a successful bank largely built on agriculture translates into major states with diverse economies and large populations such as California, Florida, Texas, Illinois, North Carolina and New York.

The Bank of North Dakota serves as the depository for state taxes and fees. It’s impossible to imagine the legislatures of major states creating a similar captive base of depositors for government-run banks while the private sector nods in agreement.

North Dakota’s agricultural-based economy is shielded from much of the gyrations of the nation’s broad economy. Better yet, there isn’t rampant housing speculation in North Dakota and the bank wasn’t forced to take on billions in subprime loans, thanks to the beneficent souls at Fannie Mae (FNM) and Freddie Mac (FRE).

“We’re a fairly conservative lot up here in the upper Midwest and we didn’t do any subprime lending,” Eric Hardmeyer, president of the Bank of North Dakota, told Mother Jones magazine. “…If we don’t understand it, we’re not going to jump into it.”

The Bank of North Dakota has about $4 billion under management and is solidly profitable. It has a portfolio of $500 million to $600 million in residential loans. The bank also provides liquidity, check clearing services and bond accounting to about 100 private banks in the state.

“For all states to look at North Dakota’s model and say this would be the panacea for all those (problems), I don’t see that happening,” Hardmeyer said. “…We were designed and set up to partner with (private banks) and not compete with them.”

But that won’t stop some earnest state legislator somewhere from proposing a state-owned bank at home to take business away from banks in the private sector. Never mind that politics infused Fannie and Freddie and turned banks into instruments of social policy, playing a major part in creating the current mess.

It’s hard to imagine that state legislators wouldn’t do worse in the future. The heavy hand of government can screw up just about any industry. Keep in mind that government mandates, especially on gas mileage, forced Detroit to build cars buyers didn’t want. And don’t forget the government-mandated ethanol boondoggle

But that won’t stop the usual flock of true believers from putting theology ahead of sound economic practices.

“My advice is everybody take a deep breath,” Hardmeyer told Mother Jones. “We’re going to get through this and we’re going to exit this as a stronger industry than when we went into it, with controls in place that are absolutely necessary, with banks understanding the risks they are taking.”

Golly, a state employee touting the strength of the free market - that’s news.


TOPICS: Business/Economy
KEYWORDS: banking; economy; nationalization; northdakota

1 posted on 03/31/2009 10:20:03 AM PDT by BGHater
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To: BGHater
I'm just going to quietly point out that North Dakota is 93% white and 6% American Indian. Mortgage loans seem to be given out to people who repay them in proper fashion. This helps keep the bank solvent.

Just sayin'

2 posted on 03/31/2009 10:33:31 AM PDT by ClearCase_guy (American Revolution II -- overdue)
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To: ClearCase_guy
“I'm just going to quietly point out that North Dakota is 93% white and 6% American Indian. Mortgage loans seem to be given out to people who repay them in proper fashion”

I would say skin color should have nothing to do with repaying loans.

Values of thrift and personal responsibility are found in every ethnic group and skin color.
The liberals want to segment us by those artificial divisions (skin color and ethnicity) and thus give a pass to someones bad behavior.

I say no way. Everyone should be held to the same standard of personal responsibility.

3 posted on 03/31/2009 10:40:59 AM PDT by HereInTheHeartland (I agree with Rick..)
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To: HereInTheHeartland
Please don't misunderstand me.

When I first went looking for a mortgage, I got turned down. It was pretty simple really: I wasn't earning enough. I waited a few years, got a better paycheck, and the bank became much happier about giving me a mortgage.

What ACORN does, is offer to sue to bank right off the bat for not giving a mortgage to people who have inadequate income. ACORN doesn't try to help everyone. I don't think they would have sued the bank on my behalf. But ACORN does sue banks on behalf of some people.

In areas where ACORN is active, banks end up giving up mortgages that they ought not to give out. The banks do it out of fear.

Also note: some of the folks who cannot repay their mortgage end up calling ACORN again: ACORN is willing to sue banks (again) for having the temerity to have given a mortgage to people who lacked the ability to repay.

I'm thinking ACORN is not active in North Dakota. I'm thinking that this helps the state bank remain solvent.

I'm all for holding everyone to the same standards of thrift and responsibility. ACORN, however, takes a different stance.

4 posted on 03/31/2009 10:48:08 AM PDT by ClearCase_guy (American Revolution II -- overdue)
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To: ClearCase_guy
Mortgage loans seem to be given out to people who repay them in proper fashion. This helps keep the bank solvent.

That pretty much says it all. There are no deadbeats in ND. They pay there bills. Welfare, probably not much. One can make a case about skin color if they like but.... I'm with you Clearguy.

5 posted on 03/31/2009 10:52:27 AM PDT by TribalPrincess2U (Welcome to 0bama's America... Be afraid, be very afraid)
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To: ClearCase_guy
I would agree with everything in your last post.
They do try to hold different standards for people who have different skin colors which is wrong.

You and I are probably on the same page, in that everyone should be treated the same no matter what their skin color.
Everyone is assumed to be acting in good faith until proven otherwise; black, white, purple or green.

Personal responsibility should be the factor that determines who gets approved.
Liberals do not believe this.

6 posted on 03/31/2009 11:08:11 AM PDT by HereInTheHeartland (I agree with Rick..)
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To: BGHater
“We’re a fairly conservative lot up here in the upper Midwest and we didn’t do any subprime lending,” Eric Hardmeyer, president of the Bank of North Dakota, told Mother Jones magazine. “…If we don’t understand it, we’re not going to jump into it.”

Words to live by.

7 posted on 03/31/2009 11:16:14 AM PDT by Slings and Arrows (Can't get enough of my snarking? http://twitter.com/slingsandarrows)
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To: ClearCase_guy
There was an interesting point made in an article about the ongoing flooding problems in Fargo.

There are areas around Fargo where whole neighborhoods are underwater, and yet the shelters that have been set up by the government, Red Cross, etc. to accommodate people whose homes are uninhabitable are nearly empty.

Go figure.

8 posted on 03/31/2009 11:27:32 AM PDT by Alberta's Child (I'm out on the outskirts of nowhere . . . with ghosts on my trail, chasing me there.)
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To: Alberta's Child

I can tell you another thing, too. You won’t hear people bitching and moaning saying, “Where was FEMA? Where is my free trailer? I need $5000 to relocate!” They sure as hell wouldn’t have been sitting in their houses waiting to be rescued or refusing to get out when they were warned. Sure you’ll have some holdouts, but for the most part I’m sure common sense dictates people’s actions.

I grew up in ND and people there just suck it up and move forward. Work harder, make more money, take care of their families and neighbors...you get the idea.

It’s an excellent place to live.


9 posted on 03/31/2009 1:32:03 PM PDT by FarRightFanatic (It wasn't an election. It was a socialist coup.)
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