3c hapter - Index of

76 Locavesting
The Washington Investment Trust, as the bank is being called,
would increase access to capital for businesses and farms, provide
fi nancing for education, public works infrastructure, and other
projects, support the local fi nancial sector, reduce costs paid by
the state for banking services, and return earnings to the state,
according to the bill. A study conducted by Washington’s Center
for State Innovation notes that North Dakota’s loan to asset ratio,
a measure of lending activity, is an average 7 percentage points
higher than the neighboring states of Montana, South Dakota,
and Wyoming. North Dakota’s loans per capita are 175 percent
higher than the U.S. average. And its bank sector is fl ourishing:
North Dakota has more bank offi ces per capita and less market
concentration than neighboring states or the U.S. average. 24
The analysis concluded that a state- owned Washington Investment
Trust could generate 8.2 percent more in new lending
activity, or $2.6 billion, creating or retaining more than 8,000 jobs,
and return $70 million in dividends to the state after 10 years.
There are very real issues with state- owned banks, most notably
the tricky mix of money and politics. The Bank of North
Dakota is basically controlled by the governor, who acts as its
chairman and appoints a seven- member advisory board. Its funds
are not federally guaranteed, but are backed instead by the state
(a pro or a con, depending on the state and your outlook for the
Fed). And despite their populist pitch, state- owned banks would
likely face loud opposition in the rancorous, antigovernment
political atmosphere.
Still, if political motive could be kept separate from the banks’
operations, a public- interest bank is an interesting model for keeping
capital local, and one for which there is growing grassroots
support. Ellen Brown, the author of Web of Debt and an advocate
for state banks, argues that moving your money to a community
bank, while a good fi rst step, is not enough to get credit fl owing,
since the real problem facing local banks is insuffi cient capital (as
opposed to deposits) to support lending. Perhaps someday soon,
community banks and credit unions will have new state- based allies
that help them remain viable and put our savings to good use.