The Bank of North Dakota's unique position as the only U.S. bank owned and operated by a state has drawn attention as a potential alternative structure amid the recent banking crisis.
Former Federal Reserve Vice Chair Randal Quarles and Cornerstone Research senior adviser William Silber give their take on how the government should responding to bank failures on Kudlow.that unfolded amid the failures of Silicon Valley Bank and Signature Bank has brought increased attention to the unique structure of the state-owned Bank of North Dakota and prompted speculation that it could serve as a template for other states to create their own banks.
The Bank of North Dakota is the only general service bank in the U.S. that is owned and operated by a state. It was founded in 1919 by a group known as the Nonpartisan League which sought to expand access to credit for the state’s farmers who relied heavily on store credit and insurance companies due to shortcomings of the region’s banking system. At the time, national banks couldn’t lend on farm loans, and state-chartered banks were undercapitalized.
The state-owned and operated bank was created by the legislature and organized under the management of the State Industrial Commission, which is chaired by the state’s governor, while an advisory board makes recommendations on its operations and a committee of executives handles the operations. , and all of its deposits are guaranteed by the full faith and credit of the state government. This means that ultimately, North Dakota taxpayers are on the hook for backstopping those deposits in the event that BND experiences a deterioration of its financial position.
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