N.H. should put stock in state-owned bank
North Dakota’s 92-year-old bank is a profitable role model
Governments don’t have a lot of choices when it comes to raising money, but one appealing idea is catching on in several states and makes sense for New Hampshire: a state-owned bank.
North Dakota has had the nation’s only state-owned bank for 92 years. It’s been successful, returning $300 million to state coffers since 1997.
While the rest of us were drowning in the 2008-09 financial meltdown, North Dakota posted its largest budget surplus ever. The state’s unemployment rate is among the lowest in the nation.
Under this model, The State Bank of New Hampshire would not compete with commercial lending institutions, but would instead become their partners. It would be able to back the commercial banks, enabling them to make more loans to local small businesses.
Because the state would be the chief backer, The State Bank of New Hampshire would not compete for individual or business deposits.
The state banking industry would be supported, not outmatched. State money that is now held in big banks on Wall Street would stay in New Hampshire, making money for New Hampshire and employing people in New Hampshire.
The State Bank of New Hampshire would be run by banking professionals, rather than government bureaucrats. North Dakota was able to avoid a lot of the damage caused by the subprime crisis because its bank only makes credit-worthy loans, and North Dakota has the lowest default rate in the nation.
In North Dakota, the governor, state attorney general and agriculture commissioner oversee the bank, while the advisory board is made up of financial professionals appointed by the governor.
It means bank operations are conducted to benefit the state.
A New Hampshire state bank could make loans for infrastructure improvements, using state companies to build roads and bridges. Local taxpayers could float their bonds with the state bank rather than an uncaring Wall Street bank. The money would stay in New Hampshire.
The Bank of North Dakota is also self-funding and self-sustaining, which means it brings in money without tapping taxpayers. The benefits of this are obvious. But add to that federally guaranteed funds like VA and FHA loans and low-income subsidies, which might go elsewhere, would stay in the state.
The profits could then be used to build a capital surplus from which other loans could be made to local businesses. The North Dakota Bank has a return on equity of 25-26 percent.
Let’s take a bridge reconstruction project as an example. The state bank could make the loan at a considerably lower cost, because the state owns the bank and collects the interest. That’s a potential savings of up to 30 percent right there, and it would create jobs in New Hampshire.
Look at student loans. North Dakota students can avail themselves of a no-fee, low-interest loan, and the bank even offers a means to help students pay that loan down.
Think of what something like that would mean in New Hampshire, which is now one of the most expensive states in the United States. in which to get a college education. An affordable student loan program could go a long way toward keeping our young people in state colleges.
It’s a no-brainer. We could repair our infrastructure, boost small business, create jobs and pay off our school bonds at low interest, while building the new schools we need and, most importantly, putting New Hampshire people in good-paying jobs.
If North Dakota can do it, so can we.
Sandra C. Harris is a former legislator and educator who lives in Claremont.