As public banking advocates, we spend a lot of time evangelizing. We talk about public banking all the time. More often than not, people get it when they hear our message about bringing tax dollars back from Wall Street and investing our money HERE at home.
One group that we have not made many inroads with is community bankers.
Community banks in Arizona are suffering and going out of business, while community banks in North Dakota are thriving; a major reason for their health is their collaboration with the Bank of North Dakota.
The Public Banking Institute recently posted a story about this topic: Big Banking Interests Push Back, Part One: Wall Street Doesn’t Want Community Bankers to Know the Truth about Public Banking
Here is an excerpt…
Public banking now occupies legislative agendas and/or local campaigns in Hawaii, Illinois, Arizona, Washington, Colorado, New Mexico, Wisconsin, Illinois, Maine, New Hampshire, Connecticut, and Pennsylvania.
In response to the enthusiastic embrace of public banking in Seattle, Washington, James Haley of the Community Bankers of Washington recently asserted that public banks will compete with community banks. He argued that the Bank of North Dakota, far from being a successful model of a public bank supporting small banks, has committed “mission creep.” Haley even asserted that public banks would support risky financial ventures. These are curiously uninformed arguments. Justin Dullum, in the January 20 Northwest Weekly, transcribed them uncritically and without inviting assessment from other experts. The result was an extremely distorted picture of public banking and no picture at all of what BND does for community banks.
Anyone wishing to get an accurate picture of what, precisely, BND does for community banks ought to listen to this seven-minute audio clip, based on a 2012 roundtable discussion that included Eric Hardmeyer of the Bank of North Dakota, Rick Clayburg of the North Dakota Bankers Association, and Gary Peterson of Lakeside State Bank in North Dakota. Of the 2008 economic meltdown, Clayberg said that the Bank of North Dakota was able to purchase loans from smaller banks, improve their equity, and help them “ride out the economic downturn.” He added that legislative oversight strengthens the scope and effectiveness of BND, and that the legislature authorized BND to assist in post-flooding redevelopment in 2010. He emphasized that the participation of local lenders is a decisive agent of implementation in all of these processes. Gary Peterson was enthusiastic about BND’s role in aiding community banks, calling the parties “true partners.” He said that it would be much more difficult to find loan participants without the backing of BND.
The BND helps, and does not compete against, community banks. During the last decade, banks in North Dakota with less than $1 billion in assets have averaged a stunning 434 percent more small business lending than the national average. Not just more lending, but more productive lending: BND enables community banks to devote more assets to productive lending rather than safe holdings like government securities. This is because the BND enables higher than average loan-to-asset ratios—better than their neighbors, and better than the nation.
North Dakota will also weather the coming decline in community banks (they are failing and closing rapidly, with terrible effects on localities) quite well relative to the rest of the country. The state, which has the most community banks per capita in the U.S., is expected to lose two banks in 2015, compared to the national average of 6.34 per state. This is important when we consider that community banks are the lifeblood of local economies. One commentator calls them the “99 percent,” an apt metaphor even if community bankers don’t always see themselves that way.
Mr. Haley asserts that public banks will become competitors, growing “financially dangerous.” According to the FDIC, 81% of banks in North Dakota are community banks–the highest ratio in the United States.
There is a proposed meeting in April between the Arizona Bankers’ Association and the Arizonans for a New Economy team. We’re hoping to foster some support for public banking at that time. (Stay tuned for details, as plans crystallize.)