Introduction to Public Banking

VIDEO: An Introduction to Public Banking, by In Context Report (7:23)

Bank of North Dakota

Under the model of the century-old Bank of North Dakota (BND), all of the state’s revenues are deposited in the Bank by law. The BND also takes a token number of individual depositors, but roughly 98 percent of its deposits come from public coffers.  The BND’s charter does not allow it to compete with local banks. Instead it partners with them, helping with depository, collateral, and regulatory challenges.

The Bank of North Dakota pays its dividends to its only shareholders -- the people of the state. Over the past two decades, despite its small population, the Bank of North Dakota has reported record profits year after year, allowing it to return several hundred million dollars to the state’s general fund. This has helped it to avoid the drastic tax increases and cuts to vital public services suffered in other states.

History of Public Banking in the U.S.

Public banking was first introduced in America by the Quakers in the colony of Pennsylvania. Several other colonial governments also established publicly-owned banks and found them to be beneficial. In the 19th century, the concept was embraced by a number of states. But by the time the Bank of North Dakota was established in the early 20th century, it held the field alone.

By early 2009, following the banking crisis of 2008, North Dakota was also the only state sporting a major budget surplus. It had the lowest unemployment, foreclosure and default rates in the country. It also had the most community banks per capita, confirming that the presence of a state-owned bank has helped rather than hurt its local banking sector.  

The Bank of North Dakota was founded in 1919 to insure a dependable supply of affordable credit for the state’s farmers, ranchers and businesses.  It makes low interest loans to students, existing small businesses and start-ups. It partners with private banks to provide a secondary market for mortgages, and it supports local governments by buying municipal bonds. To find out more about the Bank of North Dakota, click here.

Recently, two new publicly-owned banks in the U.S. have been established, the Native American Bank and the Bank of American Samoa.  As of August 2018, 15 bills are actively being pursued in cities and states across the country, showing serious legislative interest.


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