Money pot, or pit?

16 Mar 2012 By Martin Hutchinson

The Golden State, Hawaii and 15 others want to copy North Dakota’s state-owned bank. But that institution thrives because of the small Midwestern state’s fracking-driven growth and its rural and uncorrupted politics. Elsewhere, state banks risk becoming politicized money-pits.

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U.S. state legislatures in California, Hawaii and 15 other states including Vermont, Idaho, Illinois, Massachusetts, Oregon and Washington have introduced legislation to form state-owned banks on the model of the Bank of North Dakota, founded in 1919.

The Bank of North Dakota accepts deposits from the public as well as the state, which also guarantees deposits. It acts as a correspondent in North Dakota for out-of-state banks, makes loans to students and for farmland purchases, and participates with local banks in other lending. At Dec. 31 it had assets of $5.4 billion and capital of $400 million. In 2011, its net income was $70 million.

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