Good morning folks. I hope you have good day regardless of whether or not you decide to do anything for Ash Wednesday.
Well as everyone seems to know we are in an economic downturn or recession. I have been reading a lot lately about a state in America that is doing pretty well. That state is North Dakota now every state is different and they all have different products that allow for different levels of income. But the biggest difference that North Dakota has is that they have a bank that is totally run and owned by the state of North Dakota. Now, according to the Huffington Post
"The Bank of North Dakota serves as an economic development agency and "banker's bank" that lessens the loan risks of private banks and helps them finance larger projects. It offers cheap loans to farmers, students and businesses.
The bank had almost $4 billion in assets and a $2.67 billion loan portfolio at the end of last year, according to its most recent quarterly financial report. It made $58.1 million in profits in 2009, setting a record for the sixth straight year. During the last decade, the bank funneled almost $300 million in profits to North Dakota's treasury.
The bank has the advantage of being the repository for most state funds, which can be used for loans and occasional relief for private banks that need a jolt of cash during sluggish credit markets."
Also another mention in the article is that North Dakota has an unemployment rate of 4.4 percent. That is the lowest in the nation and something that my home state of Oregon could only dream of. Now I am sure there are other things that makes North Dakota different then Oregon and also makes them more successful then Oregon in terms of jobs and state budget issues. But what I wonder is what is working about their bank. One of the biggest difference is that they are not part of the FDIC so if the bank were to lose money the residents of North Dakota would be on the hook for it. But, so far that has not happened. The bank is running a surplus.
I am just wondering what makes North Dakota special? Is this a model that could work in other states? Should it be something that is attempted? Should it be something that we totally write off as a cursed socialist idea that would fail and hurt the state in the end? Any thoughts out there folks?
2 comments:
Interesting case, I don't know any more about it than what I've googled up in the last hour, but my first impressions were that this,
"One of the biggest difference is that they are not part of the FDIC so if the bank were to lose money the residents of North Dakota would be on the hook for it. But, so far that has not happened. The bank is running a surplus."
, has a lot to do with their apparent success - having consequences for bad decisions is a vital component of economic success. And also that this is a State bank, not a Nat'l bank... it can't print it's own money... it has to live within some limits. I would also suspect that there's more than a bit of "What Is Seen and What Is Not Seen"... the bank and the state may be doing well... but what more success might they have had without the drag (it is not possible that it produces no drag - by virtue of being created by the state, somewhere force is being applied directly, or indirectly, and otherwise better informed decisions are not being made because the choice has been preempted.)
I wonder if it's a coincidence that around the time the bank was implemented (and stabilized by a conservative overthrow of the socialist leaning bank mgmt & gov around 1930), state growth stalled.."From fewer than 3,000 people in 1870, North Dakota's population grew to near 680,000 by 1930. Growth then slowed, and the population has fluctuated slightly over the next seven decades, hitting a low of 617,761 in the 1970 census, with a total of 642,200 in the 2000 census" (however if the Fed Govt ever unleashes the massive oil reserves found there recently, that stagnation may get blown away).
From what I googled up, I found an interesting, positive, article from last year here,
"EH: It all gets down the management and management philosophy. We’re a fairly conservative lot up here in the upper Midwest and we didn’t do any subprime lending and we have the ability to get into the derivatives markets and put on swaps and callers and caps and credit default swaps and just chose not to do it, really chose a Warren Buffett mentality—if we don’t understand it, we’re not going to jump into it."
Having a conservative (not politically, economically) mindset, focused on core business rather than unrelated social engineering and 'get rich quick' schemes, is going to produce results. Uh... I'm not seeing that standng any real test of time in places like Kalifornia... how about Oregon?
and this,
"Our funding model, our deposit model is really what is unique as the engine that drives that bank. And that is we are the depository for all state tax collections and fees. And so we have a captive deposit base, we pay a competitive rate to the state treasurer."
Having a gauranteed "captive" source of income... is a sweet thing... and makes any success yours to lose, rather than having to win.
Having a conservative (not politically, economically) mindset, focused on core business rather than unrelated social engineering and 'get rich quick' schemes, is going to produce results. Uh... I'm not seeing that standng any real test of time in places like Kalifornia... how about Oregon?"
I think that sadly you are right. A large amount Oregon's problems are tied up with PERS and the payouts that they promised retirees as well as the ability to retire at I think 57 in this state or maybe as early as 52. I think the idea has some potential in Oregon but I know at first look the few Oregon conservatives I have talked to feel like they do not want the state running a bank. Which I think is a reasonable concern. I almost want to risk it though.
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