Many have asked: Who will set policy for public banks? Who decides whether to approve loans? How are decisionmakers insulated from bribes and financial or political pressure?
The governing legislators or lawmakers—whether at the state or municipal level—would make general policy decisions about public banks (and would likely have an advisory commission to consult), but day-to-day decisions would be made by the banks themselves—governed by their charters and subject to transparency and administrative review.
Transparency is an important part of this picture. As anyone who works for cities or counties or states, and certainly as federal workers know, if you have a public sector job, every email you write is subject to public view. Public records law and the Freedom of Information Act (FOIA) provide near-unlimited access to government employee communications and pretty much anything they write down, type, record, and keep. Courts will enforce this, too, because the lack of expectations of privacy for government workers is settled law across the U.S.
The Bank of North Dakota is the State of North Dakota doing business as the Bank of North Dakota. As Banking on Colorado points out, “A three-member State Industrial Commission oversees Bank of North Dakota, composed of the Governor, the Attorney General, and the Commissioner of Agriculture. The Bank has a seven-member Advisory Board appointed by the governor. The members must be knowledgeable in banking and finance. The Advisory Board reviews the Bank’s operations and makes recommendations to the Industrial Commission relating to the Bank’s management, services, policies and procedures.”
There is every reason to believe public banks will be fiscally conservative, balancing their chartered mandate to lend in the public interest with moderation and careful considerations of risk--moreso than big private banks who gamble with municipal money. Standard & Poor has consistently rated BND in the “A” range, indicating the highest levels of confidence in BND’s creditworthiness and practices. According to North Dakota Attorney General Wayne Stenehjem, “The  S&P review of the bank confirmed that it is well-managed and supports the economic needs of North Dakota . . . The report recognized BND for its conservative management strategy.”
In contrast, private banking is a tangled web of opacity. As Marcus Stanley wrote in 2013:
The lack of transparency in financial markets was a significant contributor to the 2008 financial crisis. The risks of toxic securities were hidden behind layers of complexity, and the credit rating agencies tasked with making the bottom line transparent to buyers had crippling conflicts of interests.
On the institutional level, the tangled balance sheets of the critical dealer banks were a major contributor to the market freeze that occurred in late 2008. Uncertainties regarding opaque over-the-counter derivatives, complex interbank relationships and "toxic asset" exposures were such that counterparties simply refused to deal with major banks at the center of the system, and the markets froze. Regulators also clearly lacked understanding of bank risk exposures both during the crisis and in the years leading up to the crisis when intervention could have been effective
At the heart of the transparency problem was and is the complexity of the shadow banking system, in which credit is intermediated through extensive securities market relationships. The balance sheets of traditional banks could be understood by examining the underwriting of their loans and their relatively limited set of funding sources. But modern universal banks have a tangled web of securities exposures involving enormously complicated derivatives commitments, short-term funding collateral and elaborately structured securities.
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