North Dakota has the country’s only state bank. It is also the state with the lowest unemployment rate and highest job growth rate. The state is not near bankruptcy , there is no credit freeze stymieing job creators, and no cut backs to social services, higher education, state pensions, and the hiring of teachers, policemen, and firefighters.
What’s going on?
Well, in part, it’s the state bank. By law, all state money that comes from taxes and fees is deposited in the bank, which then issues low interest loans to students, farmers, and businesses. The bank buys government bonds to spur development and to shore-up infrastructure. With a state population of 600,000, last year it made $60 million in profit. Of this, it returned almost one half ($30 million) to the state for projects, disaster relief, and a rainy day savings account.
Why can’t every state have a bank like this?
Instead, banking in the remaining forty-nine states operates for profit. A state’s government deposits taxes and fees in a big commercial bank that’s usually headquartered in New York. These banks primary purpose is to generate profit for shareholders. To this end, the banks make risky investments in hopes of high returns. If a bet goes bad, the government (i.e. taxpayers) cover the loss, while the banks keep all profit. How nice for the banks.