North Dakota's State-Owned Bank Provides an Economic Miracle
Source Dave Anderson
Date 11/09/02/10:57
YES! Magazine
North Dakota's Economic “Miracle”—It's Not Oil
North Dakota has had the nation's lowest unemployment ever since the
economy tanked. What's its secret?

by Ellen Brown

IN AN ARTICLE in The New York Times on August 19th titled “The North
Dakota Miracle,” Catherine Rampell writes:

"Forget the Texas Miracle. Let’s instead take a look at North Dakota,
which has the lowest unemployment rate and the fastest job growth rate
in the country.

"According to new data released by the Bureau of Labor Statistics
today, North Dakota had an unemployment rate of just 3.3 percent in
July—that’s just over a third of the national rate (9.1 percent), and
about a quarter of the rate of the state with the highest joblessness
(Nevada, at 12.9 percent).

"North Dakota has had the lowest unemployment in the country (or was
tied for the lowest unemployment rate in the country) every single
month since July 2008.

"Its healthy job market is also reflected in its payroll growth
numbers. . . . [Y]ear over year, its payrolls grew by 5.2 percent.
Texas came in second, with an increase of 2.6 percent.

"Why is North Dakota doing so well? For one of the same reasons that
Texas has been doing well: oil."

Oil is certainly a factor, but it is not what has put North Dakota
over the top. Alaska has roughly the same population as North Dakota
and produces nearly twice as much oil, yet unemployment in Alaska is
running at 7.7 percent. Montana, South Dakota, and Wyoming have all
benefited from a boom in energy prices, with Montana and Wyoming
extracting much more gas than North Dakota has. The Bakken oil field
stretches across Montana as well as North Dakota, with the greatest
Bakken oil production coming from Elm Coulee Oil Field in Montana. Yet
Montana’s unemployment rate, like Alaska’s, is 7.7 percent.

A number of other mineral-rich states were initially not affected by
the economic downturn, but they lost revenues with the later decline
in oil prices. North Dakota is the only state to be in continuous
budget surplus since the banking crisis of 2008. Its balance sheet is
so strong that it recently reduced individual income taxes and
property taxes by a combined $400 million, and is debating further
cuts. It also has the lowest foreclosure rate and lowest credit card
default rate in the country, and it has had NO bank failures in at
least the last decade.

If its secret isn’t oil, what is so unique about the state? North
Dakota has one thing that no other state has: its own state-owned

Access to credit is the enabling factor that has fostered both a boom
in oil and record profits from agriculture in North Dakota. The Bank
of North Dakota (BND) does not compete with local banks but partners
with them, helping with capital and liquidity requirements. It
participates in loans, provides guarantees, and acts as a sort of
mini-Fed for the state. In 2010, according to the BND’s annual report:

"The Bank provided Secured and Unsecured Federal Fund Lines to 95
financial institutions with combined lines of over $318 million for
2010. Federal Fund sales averaged over $13 million per day, peaking at
$36 million in June."

Over a 15-year period the BND has contributed more to the state budget
than oil taxes have.
The BND also has a loan program called Flex PACE, which allows a local
community to provide assistance to borrowers in areas of jobs
retention, technology creation, retail, small business, and essential
community services. In 2010, according to the BND annual report:

"The need for Flex PACE funding was substantial, growing by 62 percent
to help finance essential community services as energy development
spiked in western North Dakota. Commercial bank participation loans
grew to 64 percent of the entire $1.022 billion portfolio."

The BND’s revenues have also been a major boost to the state budget.
It has contributed over $300 million in revenues over the last decade
to state coffers, a substantial sum for a state with a population less
than one-tenth the size of Los Angeles County. According to a study by
the Center for State Innovation, from 2007 to 2009 the BND added
nearly as much money to the state’s general fund as oil and gas tax
revenues did (oil and gas revenues added $71 million while the Bank of
North Dakota returned $60 million). Over a 15-year period, according
to other data, the BND has contributed more to the state budget than
oil taxes have.

The state-owned bank allows North Dakota to capitalize on its
resources to full advantage.
North Dakota’s money and banking reserves are being kept within the
state and invested there. The BND’s loan portfolio shows a steady
uninterrupted increase in North Dakota lending programs since 2006.

According to the annual BND report:

"Financially, 2010 was our strongest year ever. Profits increased by
nearly $4 million to $61.9 million during our seventh consecutive year
of record profits. Earnings were fueled by a strong and growing
deposit base, brought about by a surging energy and agricultural
economy. We ended the year with the highest capital level in our
history at just over $325 million. The Bank returned a healthy 19
percent ROE, which represents the state’s return on its investment.
A 19 percent return on equity! How many states are getting that sort
of return on their Wall Street investments?"

Timothy Canova is Professor of International Economic Law at Chapman
University School of Law in Orange, California. In a June 2011 paper
called “The Public Option: The Case for Parallel Public Banking
Institutions,” he compares North Dakota’s financial situation to
California’s. He writes of North Dakota and its state-owned bank:

"The state deposits its tax revenues in the Bank, which in turn
ensures that a high portion of state funds are invested in the state
economy. In addition, the Bank is able to remit a portion of its
earnings back to the state treasury . . . . Thanks in part to these
institutional arrangements, North Dakota is the only state that has
been in continuous budget surplus since before the financial crisis
and it has the lowest unemployment rate in the country."

He then compares the dire situation in California:

"In contrast, California is the largest state economy in the nation,
yet without a state-owned bank, is unable to steer hundreds of
billions of dollars in state revenues into productive investment
within the state. Instead, California deposits its many billions in
tax revenues in large private banks which often lend the funds
out-of-state, invest them in speculative trading strategies (including
derivative bets against the state’s own bonds), and do not remit any
of their earnings back to the state treasury. Meanwhile, California
suffers from constrained private credit conditions, high unemployment
levels well above the national average, and the stagnation of state
and local tax receipts. The state’s only response has been to stumble
from one budget crisis to another for the past three years, with each
round of spending cuts further weakening its economy, tax base, and
credit rating."

Not all states have oil, of course (and it’s hardly a sustainable
basis for an economy), but all could learn from the state-owned bank
that allows North Dakota to capitalize on its resources to full
advantage. States that deposit their revenues and invest their capital
in large Wall Street banks are giving this economic opportunity away.

Ellen Brown developed her research skills as an attorney practicing
civil litigation in Los Angeles. In Web of Debt, her latest of eleven
books, she turns those skills to an analysis of the Federal Reserve
and “the money trust.” She shows how this private cartel has usurped
the power to create money from the people themselves, and how we the
people can get it back. She is president of the Public Banking
Institute,, and has websites at and

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