Vermont’s Public Bank

Over in North Dakota, the state-run bank has been an oddball, yet very successful, model of 1910s socialism.  It’s the only state-run bank…well, although it looks like it’s getting a sibling in Vermont.

Three out of four Vermont communities have voted to convert the state-run Vermont Economic Development Authority into a true banking institution.

Banks do business by storing some peoples’ money, and lending it out to others, charging interest on the loan.   Part of the 2008 economic meltdown was due to banks taking far too risky investments, losing not only the principal but harming their ability to pay interest to those whose money they were lending out.  Lending stopped, borrowing stopped, savings were depleted, and everything went to hell for a time.    That is, until the Federal government stepped in to bail out the messed-up banks.

The hope is that a state-owned bank, taking a more credit-uniony stance, will run its lending policies in the interest of building value, not simply turning a quick buck.  The Bank of North Dakota does an enormous amount of business investment, handles college savings accounts for North Dakota children, and is more directly involved in the financial building of the State’s economy than some financial advisory board.  As the Vermont study points out, states already do a lot of lending and financial investment without the benefit of acting in a bankly manner.  Actually crossing that line into hanging a big “BANK” sign on the capital building makes one side worry about financial abuse, the other side cringe away from the evils of Socialism, but calling a bank a bank and doing business accordingly is the smartest step for a state that wants to control its own financial wellbeing.

Good luck, Vermont:  the Bank of North Dakota turns a hundred years old in 2019; hopefully you’ll overcome any shortsighted opposition and come into being before then.