The public option for banking

The Bank of North Dakota (BND) is owned and operated by the state of North Dakota, and is the only publicly owned bank in the United States. Founded in 1919 as a response to a credit crisis, BND has helped North Dakota weather the current economic recession. According the North Dakota Department of Commerce, in 2009, the 90-year-old BND turned a profit of $58.1 million, which went into the state’s general operating fund. No surprise that North Dakota is currently one of two states still showing a budget surplus. (The other is Montana.)

You can find two excellent articles on the growing push for publicly owned banks, here and here. According to author Ellen Brown, there are bills pending in Washington State, Illinois and Michigan to create publicly owned banks, and seven candidates for governor are campaigning for state-owned banks.  The proposed public banks are modeled after BND.

The Bank of North Dakota acts as a “bankers’ bank,” partnering with other banks in “participation loans,” which allow them to compete with larger banks. In a participation loan, the community bank originates the loan and takes responsibility for it, while the participating bank contributes funds and shares in the risk and profits. The Bank of North Dakota also makes low-interest loans to students, farmers and businesses; underwrites municipal bonds; and provides liquidity for more than 100 banks around the state.

Brown is passionate about the need for publicly owned banks, and sees them as an ideal way to keep wealth in the community.

We the people have given away our sovereign money-creating power to private, for-profit lending institutions, which have used it to siphon wealth from the productive economy. If we were to take that power back, we could generate the credit we need to underwrite a whole cornucopia of projects that we don’t even consider because we think we lack the “money.” We have the labor and we have the materials; we just lack the “liquidity” necessary to put them together to create products and services.

Money today is just a ticket, a receipt for work performed and goods delivered. We can fund the work we need done by creating our own credit. The real promise of publicly owned banks is not that they can bail out subprime borrowers but that they can jumpstart the economy by creating real wealth. They can provide the liquidity to put labor and materials together, allowing the economy to build and grow. Our private, profit-driven banking sector has been bleeding wealth from the rest of the economy. Public-interest banks can transfuse the economy with the credit it needs to flourish and be productive once again.

 

Madonna Gauding Madonna Gauding (242 Posts)

Madonna Gauding is a freelance writer, illustrator and book designer living in St. Louis. MO. She is the author of 10 books on a variety of "mind, body, spirit" topics.