setting up their own state-owned banks, following the model of North Dakota, the only state that seems to have escaped the credit crisis unscathed. The 92-year-old Bank of North Dakota (BND), currently the only state-owned U.S. bank, has helped North Dakota avoid the looming budgetary disasters of other states. In 2009, North Dakota sported the largest budget surplus it had ever had. The BND helps fund not only local government but local banks and businesses, by providing matching funds for loans to commercial banks to support small business lending.
In the last month, three states have introduced bills for state-owned banks, following the North Dakota model. On January 11, a bill to establish a state- owned bank was introduced in the Oregon State legislature; on January 13, a similar bill was introduced in Washington State (discussed in an earlier article here); and on February 4, a bill was introduced in theMaryland legislature for a feasibility study looking into the possibilities. They join Illinois, Virginia, Hawaii, andMassachusetts, which introduced similar bills in 2010.
Broad-based Support
The bills are widely supported by small business owners. The Seattle Times reported on February 3 that 79% of 107 business owners surveyed by the Main Street Alliance of Washington supported the Washington bill. More than half said they had experienced a tightening of business credit, and three- fourths of those said they could create additional jobs if their credit needs were met.
Omtimes.com
A survey by the Main Street Alliance of Oregon produced similar results. Their survey, which covered 115 businesses in 28 communities, found that two-thirds of small-business owners had delayed or canceled expansions because of credit problems; 41 percent had been turned down for credit; and 42 percent had seen their credit terms deteriorate. Three- quarters of the business owners surveyed supported the Oregon bill.
Also supporting the idea of a state-owned bank is Oregon state treasurer Ted Wheeler, with this twist: he thinks Oregon can unlock additional lending capacity in partnership with existing institutions by creating a “virtual” bank. The state would not need to build new brick and mortar banks requiring hundreds of new employees to service them. The new tools afforded the state by being a “bank” could be arranged quickly and cheaply through a framework he calls a “virtual economic development bank.” In an OpEd posted
onOregonlive.com on February 9, he wrote:
This new model would consolidate Oregon’s various economic development loan programs in one place, and allow state government to step in as a new lending participant, which will help qualified Oregonians to secure additional
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