In my interview with economist and scholar Umair Haque last week, Haque said one of the ways Americans could take back power from Wall Street is by divesting from megabanks and putting their money into smaller community banks and credit unions. As it turns out, North Dakota beat us to the punch.
Since 1919, North Dakota has been the only state in America with a publicly owned bank. Appropriately called the Bank of North Dakota (BND), the institution was established to "promote agriculture, commerce, and industry" and to "be helpful to and assist in the development of ... financial institutions ... within the State."
The BND does very little direct lending and instead helps prop up a large network of community banks throughout the state, financing parts of loans to farms and businesses. This mitigates some of the risk for the smaller banks and frees them up to make more loans, thus spurring industry and, subsequently, job growth.
In essence, this is socialism providing the means for capitalism, and it's working very well:
Although BND has foregone some profit in order to expand credit and lower the cost of loans for businesses in North Dakota, the bank still has a relatively high return on assets (ROA), a standard measure of bank performance. Its ROA was 1.46 percent in 2010, compared to a median ROA for all banks in the country of 0.61 percent. In 2006, BND's ROA was 1.99 percent, compared to a median of 1.00 percent for banks nationally.
To learn more about North Dakota's very smart banking system, go here.