Sunday, August 9, 2009

The only state-owned bank in the USA is doing very well

It is a rare event these days to find a sound bank in the USA and given American attitudes towards public ownership it is really surprising that it is the only government-owned bank. The Bank of North Dakota has a sound financial basis and is profitable. (Puerto Rico's Government Development Bank is also publicly owned but Puerto Rico is a US territory not a state.) It was created 90 years ago and is "what Republicans might call an idiosyncratic bastion of socialism. It earned a record profit last year even as its private-sector corollaries lost billions."

The bank plays an important role in the economic development of North Dakota, which has a population of only 600,000. Currently the State of North Dakota does not have any budgetary problems, unlike most other states. (California, for instance, can't even pay its bills and uses IOUs - which the State itself refuses to accept as payment!) North Dakota, on the other hand, has the largest surplus in its history. The Bank pays dividends to the State and in difficult times such as 2001 and 2002 when there was a budget deficit the bank increased the dividend on the orders of the governor.