California [has] avoided bankruptcy for the time being, but 46 of 50 states are insolvent and could be filing Chapter 9 bankruptcy proceedings in the next two years.From here. A publicly owned bank is something us lefties have been calling for since long before I was born, but I had no idea that this was in practice in the US, much less in that state. Maybe I should stop making fun of North Dakota. Meanwhile, California is reduced to paying their state employees with IOUs...
One of the four states that is not insolvent is an unlikely candidate for the distinction - North Dakota. . .
What does the State of North Dakota have that other states don't? The answer seems to be: its own bank. In fact, North Dakota has the only state-owned bank in the nation. The state legislature established the Bank of North Dakota in 1919. Fleetham writes that the bank was set up to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men. By law, the state must deposit all its funds in the bank, and the state guarantees its deposits. Three elected officials oversee the bank: the governor, the attorney general, and the commissioner of agriculture. The bank's stated mission is to deliver sound financial services that promote agriculture, commerce and industry in North Dakota. The bank operates as a bankers' bank, partnering with private banks to loan money to farmers, real estate developers, schools and small businesses. It loans money to students (over 184,000 outstanding loans), and it purchases municipal bonds from public institutions.
Still, you may ask, how does that solve the solvency problem? Isn't the state still limited to spending only the money it has? The answer is no. Certified, card-carrying bankers are allowed to do something nobody else can do: they can create "credit" with accounting entries on their books.
Tuesday, July 7, 2009
State-owned bank succeeds -- in an unlikely place
Apparently 46 out of 50 US states are more or less insolvent. One of the ones that isn't is a bit of a surprise: