State Banks - Pros and Cons.

[Pete]

STATE OWNED BANKS (See www.WEBOFDEBT.com for extensive blog)

Currency the only State owned bank in the U.S. is the Bank of North Dakota.   The Bank is backed by the full faith of the State and the tax payers are the beneficiaries on any profits of the bank as they are plowed back into state programs that otherwise would be funded by taxes. 

About BND

Deposit Base

In contrast to most commercial banks, Bank of North Dakota (BND) is not a member of the Federal Deposit Insurance Corporation (FDIC). North Dakota Century Code 6-09-10 provides that all BND deposits are guaranteed by the full faith and credit of the State of North Dakota.

The deposit base of BND is unique. Its primary deposit base is the State of North Dakota. All state funds and funds of state institutions are deposited with Bank of North Dakota, as required by law. Other deposits are accepted from any source, private citizens to the U.S. government.

Policy and Governance

The state Industrial Commission oversees Bank of North Dakota, as mandated by the 1919 state legislature. Members of the Industrial Commission are the Governor, who acts as chairman, the Attorney General and the Commissioner of Agriculture of the State of North Dakota.

The Bank also has a seven-member Advisory Board appointed by the Governor. The members are knowledgeable in banking and finance. The Advisory Board reviews the Bank's operations and makes recommendations to the Industrial Commission relating to the Bank's management, services, policies and procedures.

Services:

Bank of North Dakota is a Correspondent Bank for most financial institutions in North Dakota. In this role, the Bank provides a secure, cost-effective service with high availability of funds. Currently, the Bank processes more than 3 million items per month.

Many North Dakota financial institutions maintain their check clearing with BND and use the Bank's account with the Federal Reserve Bank to settle their cash letter charges, ACH activity, or other activity received through the Federal Reserve System.

In addition, our Retail Department provides services to depositors of Bank of North Dakota. While BND does have retail products similar to other financial institutions, these services are limited in scope.

In contrast to most commercial banks, Bank of North Dakota is NOT a member of the Federal Deposit Insurance Corporation (FDIC). North Dakota Century Code 6-09-10 provides that all deposits in Bank of North Dakota are guaranteed by the state.

BND RETURNS PROFITS TO THE STATE GENERAL FUND (555m since 1945).

Services include:

• Cash Management
• Lending
• Student Loans
• Underwriting
• Check Clearing
• ACH
• Treasury Services
• Federal Reserve Settlement Program
• Currency Program (US and Foreign)

See the PDF file attached to this discussion topic for the BND CHARTER.

[Pete]

PLEASE... PLEASE... PLEASE... before posting your expert monetary philosophy; your exemplary Keynes v. Hayek knowledge; the volumes of Von Mises sound money stories; the socialism v. free market rhetoric; why PM v. linen Fiat; etc etc... note that this is a not discussion on any of those topics. This is to discuss the pros and cons of state OWNED banks to essentially replace FED services in the State of Ohio. (The Free Bank of Ohio)

Before commenting please at least skim, or review, the document attached above (t06c09.pdf) which is the Charter for the Bank of North Dakota, currently the only State OWNED Bank in the U.S. Additional related information can be found on www.WebofDebt.com.

[Harold Rainsberger]

Got to agree with Pete here (Discalaimer: My home bot is broke, I am at the office and only had a few secs to explore).

Baby steps.

First we must take the power from the Feds. Then work in our own states to restore the Free Market System to the banks. Any state that runs their banks as the Feds did, will fail and deserveably, I must add. New banks that can use common sense will prevail. Any State Government that bails out these banks with State Taxes will be short lived because they are much easier to replace than the Feds are.

Anyone who hasn't yet, please read what ALan Greenspan wrote in 1967. It has more enlightenment in it on this subject than I can find anywhere else. It is a short read.



http://www.usagold.com/gildedopinion/greenspan.html

[Pete]

Poster JosephF (JF) sees the following negatives (CONS) for State Owned Banks:

1. Not FDIC (Federal Deposit Insurance Fund) Insured.

2. JF believes Item 1 poses excessive potential risks to the tax payers of ND since the bank is self insuring.
JF believes that in the event of a BND liquidity crisis, the ND taxpayers would be on the hook to "insure that depositors get their money".
JF also believes that the FDIC's insurance role for those insured banks operating credit accounts under the rules of the Banking Act (a.k.a. Fractional Reserve Lending) would include a backstop of a bank in the case of a "bank run".

3. JF believes that the bank of ND is "regulated by the Federal Reserve" and are part of the Federal Reserve System, therefore having access to the FED Central Bank short term lending facilities ("discount window" - used typically for liquidity shortage).
JF does not state if or why this specifically is a negative.
This also then implies the BND has access to the credit at the Federal Funds Rate and Sub Prime Rate.

4. The Bank of ND uses Federal Reserve Notes (US Fiat) as it's currency. (Understand that stereo-typical Austrian School FED and FIAT philosophical negatives are implied here.)

5. Because the Bank of ND is essentially a public State Central Bank (operates under US Banking Laws), they have the same underlying systemic blemishes and risks as the current banking system. Thus removing the FED a State Central Bank would remain offering no difference or benefit.

[Pete]

Please limit all comments in this discussion to the pros and cons of state banks. It is understood that many issues are indeed related, so if there is an issue related to State Banks please try to limit you input to the hows and whys of the correlation. Other comments should be posted to the main discussion groups, or a new discussion of your choice may be started.

In this way the posts can remain on target and there can be a productive exchange of ideas on a particular topic.

Thank you for your understanding and your continued input on this topic.