7 ms·

Bank of North Dakota

63 points by popcalc 2y ago

averysmallbird 2y ago
Nice to see this posted. Understated in this is that BND also helped North Dakota avoid the worst of the mortgage crisis, and that the student loan program (combined with decent state universities) make education more affordable. As far as banks go, BND is a gem.
- kemiller2002 2y ago
  When I was in college, I took a number of Econ courses, and I still remember the Macro Econ professor talk about banks failing. This was in the mid 90's. He flat out said that a bank failing is something that just doesn't happen anymore. He pretty much said, you'll never see it happen. This is before they repealed the Glass-Steagall act. I still remember the mortgage crisis unfold in disbelief that they didn't see it coming. I worked in finance at the time, and I truly realize how fragile businesses (banks, etc.) are, and our trust in a number of things is completely unfounded. We have certain protections now, but I understood at that moment why people my parent's age (born during WWII) and older didn't trust banks, etc.
  - graemep 2y ago
    I had the same feeling. I remember the first time I looked at the accounts of North Rock (covering for a colleague at a small fund manager), the first British bank to fail (and the only one to go under rather than getting a bailout) and being horrified at its reliance on interbank markets. A lot of British banks needed bailing out, but but building societies (mutuals owned by customers, traditionally mortgage lenders but mostly full service retail banks) were fine, but big banks and at least two former building societies that had demutualised were not. From that point of view it sounds as though Bank of North Dakota sounds like another example of different ownership structures enabling greater stability than shareholder owned big banks do.
  - wbl 2y ago
    It was the banks holding MBSs that failed. Banks always hold mortgages. With Glass Steagal the investment banks couldn't have jumped in to do the rescues.
highwayman47 2y ago
I wish there was some books, lectures, etc. about what makes BND unique and what it does. Can’t find anything.
- kotor 2y ago
  Ellen Brown has written about public banks in general, and BND specifically. https://ellenbrown.com/ https://ellenbrown.com/
- caseyohara 2y ago
  Right in the External Links section of TFA. - Bank of North Dakota Documentary, produced by Prairie Public Television https://www.youtube.com/watch?v=L75oinBuY1g https://www.youtube.com/watch?v=L75oinBuY1g - The BND Story: 100 Years, 1919–2019 https://thebndstory.nd.gov/ https://thebndstory.nd.gov/
- dmoy 2y ago
  There's https://thebndstory.nd.gov/the-early-years/the-birth-of-the-bank/ https://thebndstory.nd.gov/the-early-years/the-birth-of-the-... which clicks through to a decent amount of historical info. But if you're taking about like a modern comparison, yea, probably gotta find an expert in banking regulatory law and ask them. (And if they're not in the Midwest, you might need to ask them to read up and learn first, and then tell you lol)
- chumich1 2y ago
  Not directly about the bank, but [Insurgent Democracy](https://press.uchicago.edu/ucp/books/book/chicago/I/bo21028306.html https://press.uchicago.edu/ucp/books/book/chicago/I/bo210283...) is a great read. The Non-Partisan League successfully organized rural farmers against corporate power in the 1910s & 20s. Though they only were in power for a decade or so, their legacy is still quite strong. BND, state hail insurance, and a state-run grain mill to name a few!
  - averysmallbird 2y ago
    Great book.
tptacek 2y ago
How is BND's success influenced by the very small size of its assets held relative to other banks? The BNY would have assets comparable to those of a major commercial bank.
- kasey_junk 2y ago
  Not sure how you are comparing them but BNY was a major commercial bank until it sold its retail to chase. Now it’s a too big to fail private financial services company. BND is interesting because it’s literally North Dakota, the states, banker. BNY governmental association is long gone in comparison.
  - sparky_z 2y ago
    I thought they were saying that a hypothetical state run "Bank of New York", set up similar to BND, would have a lot more assets. They weren't referring to any real organizations called BNY.
    - tptacek 2y ago
      Yep, that's what I meant. Sorry!
      - kasey_junk 2y ago
        Hard to know honestly. My personal (non-expert) opinion is that the assets are the less important attribute. The more important attribute is the small size and high uniformity of the state population and the industry mix of the state. That makes the policy decisions for bnd less contentious and non-competitive which allows it to do things other bigger states might not be able to do with a state bank. The asset size seems incidental to the population size. But perhaps not.
        tptacek 2y ago
        That makes sense. I'm sort of operating under the assumption that it's straightforward to get X returns at Y AUM but much harder to do that as Y grows.
User23 2y ago
Can anyone who has a real world hands on experiential understanding of the banking system explain to me what exactly bank “capital” is? I’m well aware reserve requirements aren’t a thing anymore and that bank capital is different. I would find it rather amusing if other banks’ liabilities can somehow be defined as a bank’s capital, because it would mean bank capitalization in aggregate is really just banks expanding their balance sheets. This in turn would suggest that it’s mainly, from an outcomes perspective, about allowing the major banks to dictate to the smaller ones by the former conditionally refusing to expand their own balance sheets to coerce the latter.
- kasey_junk 2y ago
  Bank capital is trivially defined as the difference between assets and liabilities on the balance sheet. What you are probably more curious about is regulatory capital. That unfortunately is very complex. Each regulator will have different formulas for how to calculate that (some of which are informed by state or national law or even international treaty). Regulators generally are pretty hyper focused on contagion risk when it comes to nested balance sheets. Though obviously there are cases where new financial instruments or changed regulatory regimes leave the regulators flat footed (see 2008) it’s reasonably rare in first world western style economies.
- impish9208 2y ago
  > I’m well aware reserve requirements aren’t a thing anymore Uhh, where did you hear this?
  - kasey_junk 2y ago
    Probably in relation to https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm
    - impish9208 2y ago
      Ahh, I guess that makes sense. I do want to point out that the reserve requirement ratio is currently at zero does not mean that it’s “not a thing anymore”.
Der_Einzige 2y ago
Why should I care when credit unions have always treated me better? Banks don’t need to exist in a world where credit unions work. Credit unions need to be more directly tied to “left wing thought” in general. Most Bernie types hardly even talk about the role that banks (even public banks like this one) play in screwing the little person over beyond meme stuff like housing which isn’t even in their control.
- parineum 2y ago
  How is BND screwing the little person?
  - Der_Einzige 2y ago
    It’s not, but credit unions don’t either and they’re more “left wing” ideologically.
    - tivert 2y ago
      >> How is BND screwing the little person? > It’s not, but credit unions don’t either and they’re more “left wing” ideologically. Are you just being idiosyncratic? "State-owned business" (like the BND) sounds pretty "'left wing' ideologically" to me.
    - AnimalMuppet 2y ago
      And why do I care whether my financial institution is more "left wing" ideologically? More: If they are, why would I regard that as a good thing? Ideology is the last thing I want from a financial institution.
      - marssaxman 2y ago
        I absolutely do want my financial institution to have an ideology which is centered around customer service rather than profit extraction. I switched to credit unions a long time ago and I will never go back.
- 2y ago
milesward 2y ago
It's almost like this government thing has legs...

63 points by popcalc 2y ago

Nice to see this posted. Understated in this is that BND also helped North Dakota avoid the worst of the mortgage crisis, and that the student loan program (combined with decent state universities) make education more affordable. As far as banks go, BND is a gem.

kemiller2002 2y ago
When I was in college, I took a number of Econ courses, and I still remember the Macro Econ professor talk about banks failing. This was in the mid 90's. He flat out said that a bank failing is something that just doesn't happen anymore. He pretty much said, you'll never see it happen. This is before they repealed the Glass-Steagall act. I still remember the mortgage crisis unfold in disbelief that they didn't see it coming. I worked in finance at the time, and I truly realize how fragile businesses (banks, etc.) are, and our trust in a number of things is completely unfounded. We have certain protections now, but I understood at that moment why people my parent's age (born during WWII) and older didn't trust banks, etc.
- graemep 2y ago
  I had the same feeling. I remember the first time I looked at the accounts of North Rock (covering for a colleague at a small fund manager), the first British bank to fail (and the only one to go under rather than getting a bailout) and being horrified at its reliance on interbank markets. A lot of British banks needed bailing out, but but building societies (mutuals owned by customers, traditionally mortgage lenders but mostly full service retail banks) were fine, but big banks and at least two former building societies that had demutualised were not. From that point of view it sounds as though Bank of North Dakota sounds like another example of different ownership structures enabling greater stability than shareholder owned big banks do.
- wbl 2y ago
  It was the banks holding MBSs that failed. Banks always hold mortgages. With Glass Steagal the investment banks couldn't have jumped in to do the rescues.

highwayman47 2y ago

I wish there was some books, lectures, etc. about what makes BND unique and what it does. Can’t find anything.

kotor 2y ago
Ellen Brown has written about public banks in general, and BND specifically. https://ellenbrown.com/ https://ellenbrown.com/
caseyohara 2y ago
Right in the External Links section of TFA. - Bank of North Dakota Documentary, produced by Prairie Public Television https://www.youtube.com/watch?v=L75oinBuY1g https://www.youtube.com/watch?v=L75oinBuY1g - The BND Story: 100 Years, 1919–2019 https://thebndstory.nd.gov/ https://thebndstory.nd.gov/
dmoy 2y ago
There's https://thebndstory.nd.gov/the-early-years/the-birth-of-the-bank/ https://thebndstory.nd.gov/the-early-years/the-birth-of-the-... which clicks through to a decent amount of historical info. But if you're taking about like a modern comparison, yea, probably gotta find an expert in banking regulatory law and ask them. (And if they're not in the Midwest, you might need to ask them to read up and learn first, and then tell you lol)
chumich1 2y ago
Not directly about the bank, but [Insurgent Democracy](https://press.uchicago.edu/ucp/books/book/chicago/I/bo21028306.html https://press.uchicago.edu/ucp/books/book/chicago/I/bo210283...) is a great read. The Non-Partisan League successfully organized rural farmers against corporate power in the 1910s & 20s. Though they only were in power for a decade or so, their legacy is still quite strong. BND, state hail insurance, and a state-run grain mill to name a few!
- averysmallbird 2y ago
  Great book.

tptacek 2y ago

How is BND's success influenced by the very small size of its assets held relative to other banks? The BNY would have assets comparable to those of a major commercial bank.

kasey_junk 2y ago
Not sure how you are comparing them but BNY was a major commercial bank until it sold its retail to chase. Now it’s a too big to fail private financial services company. BND is interesting because it’s literally North Dakota, the states, banker. BNY governmental association is long gone in comparison.
- sparky_z 2y ago
  I thought they were saying that a hypothetical state run "Bank of New York", set up similar to BND, would have a lot more assets. They weren't referring to any real organizations called BNY.
  - tptacek 2y ago
    Yep, that's what I meant. Sorry!
    - kasey_junk 2y ago
      Hard to know honestly. My personal (non-expert) opinion is that the assets are the less important attribute. The more important attribute is the small size and high uniformity of the state population and the industry mix of the state. That makes the policy decisions for bnd less contentious and non-competitive which allows it to do things other bigger states might not be able to do with a state bank. The asset size seems incidental to the population size. But perhaps not.
      - tptacek 2y ago
        That makes sense. I'm sort of operating under the assumption that it's straightforward to get X returns at Y AUM but much harder to do that as Y grows.

User23 2y ago

Can anyone who has a real world hands on experiential understanding of the banking system explain to me what exactly bank “capital” is? I’m well aware reserve requirements aren’t a thing anymore and that bank capital is different. I would find it rather amusing if other banks’ liabilities can somehow be defined as a bank’s capital, because it would mean bank capitalization in aggregate is really just banks expanding their balance sheets. This in turn would suggest that it’s mainly, from an outcomes perspective, about allowing the major banks to dictate to the smaller ones by the former conditionally refusing to expand their own balance sheets to coerce the latter.

kasey_junk 2y ago
Bank capital is trivially defined as the difference between assets and liabilities on the balance sheet. What you are probably more curious about is regulatory capital. That unfortunately is very complex. Each regulator will have different formulas for how to calculate that (some of which are informed by state or national law or even international treaty). Regulators generally are pretty hyper focused on contagion risk when it comes to nested balance sheets. Though obviously there are cases where new financial instruments or changed regulatory regimes leave the regulators flat footed (see 2008) it’s reasonably rare in first world western style economies.
impish9208 2y ago
> I’m well aware reserve requirements aren’t a thing anymore Uhh, where did you hear this?
- kasey_junk 2y ago
  Probably in relation to https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm
  - impish9208 2y ago
    Ahh, I guess that makes sense. I do want to point out that the reserve requirement ratio is currently at zero does not mean that it’s “not a thing anymore”.

Der_Einzige 2y ago

Why should I care when credit unions have always treated me better? Banks don’t need to exist in a world where credit unions work. Credit unions need to be more directly tied to “left wing thought” in general. Most Bernie types hardly even talk about the role that banks (even public banks like this one) play in screwing the little person over beyond meme stuff like housing which isn’t even in their control.

parineum 2y ago
How is BND screwing the little person?
- Der_Einzige 2y ago
  It’s not, but credit unions don’t either and they’re more “left wing” ideologically.
  - tivert 2y ago
    >> How is BND screwing the little person? > It’s not, but credit unions don’t either and they’re more “left wing” ideologically. Are you just being idiosyncratic? "State-owned business" (like the BND) sounds pretty "'left wing' ideologically" to me.
  - AnimalMuppet 2y ago
    And why do I care whether my financial institution is more "left wing" ideologically? More: If they are, why would I regard that as a good thing? Ideology is the last thing I want from a financial institution.
    - marssaxman 2y ago
      I absolutely do want my financial institution to have an ideology which is centered around customer service rather than profit extraction. I switched to credit unions a long time ago and I will never go back.
2y ago

milesward 2y ago

It's almost like this government thing has legs...