In light of current conditions in North Dakota, let's hope their money hasn't since brought a new meaning to the term "slush fund."

Small financial institutions that didn't get into making mortgages, or atleast bad ones; seem to be doing pretty well in light of everything.

I'm guessing they don't pay their CEO 20 million a year, and the employees that cause huge losses of profits 1 million dollar retention bonuses.

So much for listening to the people who like to parrot the "private business always does better than the Government, so why don't the Government just butt out" lunacy.

@Kimaroo: For the most part, but they did get hit hard on their credit card business, when people stopped making card payments in order to keep their house.

@Pixelantes Anonymous:

And that is we are the depository for all state tax collections and fees. And so we have a captive deposit base...

Gee, if I made it the LAW that all payments had to be through my bank, I'd probably do pretty well too.

@Kimaroo: it's not just the mortgages that were the problem, that was just the tip of the iceberg.

Lets not forget about the derivitive investment market that they probably avoided.

@Pixelantes Anonymous: Anecdote v. Data.

@Pixelantes Anonymous: One success story does not negate all the other government's failures.

Could it also be that there's only one bank in North Dakota?

I kid because I love...

I think my office mates felt the shock of my eyes rolling.

motherjones, huffpo? what's next, foxnews?

Sugar beets, durum wheat, Byron Dorgan's combover AND socializums?!?

paradise.

@Pixelantes Anonymous: That is quite a leap you made there Michael Jordan.

last year was a great year for agriculture industries. Considering that North Dakota has little else, this article is no surprise

@Pixelantes Anonymous: Correlation does not equal causation. Also: see Applekid's post.

@Applekid: Are you saying it doesn't make sense for state funds to be deposited in a state-held bank?

I live in Fargo, ND. Our only state budget problems are that we have too much of a surplus and the state is trying to figure out how to spend it wisely.

@projoe1979: But it does negate the argument that government ALWAYS fails where private enterprise succeeds.

None of Canada's banks had financial problems in 2008, all made a profit, and all of them had 9:1 lending ratios (lending nine of every ten dollars deposited). All the US institutions (along with other countries) that are in the hole had lending ratios between 30:1 and 35:1.

I wouldn't doubt that the ND bank in question also followed similar restrictive and cautious rules. And from reading the item, it sounds more like a credit union or a farmer's coop than a commercial bank...not that that's a bad thing.

There was a good article/act on yesterdays "This American Life" about how FDIC takes over a bank. very interesting.

@Saboth: You only get that amount of scratch when you have proven you are capable of engineering worldwide financial collapse via leverage of something "too big to fail." Hell, the people running _this_ bank probably have less than 10 vacation homes and might not even own a small country.

No bailouts for these losers in North Dakota. Don't they know that it's "socialism" to do this sort of thing? God will smite them, I'm sure of it.

"MJ: Clearly other banks also invest their deposits. Is the difference that you are investing a larger portion of that money into the state's own economy?
EH: Yeah, absolutely."

So, basically, the bank does almost all of its investing in the state and, since ND has been doing very well, the bank is doing well. If this were the Bank of California or Florida or Nevada or Michigan they would have been investing in crappy mortgages and would have died months ago.

Also, a lot of BND's loans are federal student loans, which are non-bankruptable.

Also, the money quote:
"MJ: If other states had a bank like yours, do you think they would have been more insulated from the credit crisis?
EH: It all gets down the management and management philosophy. We're a fairly conservative lot up here in the upper Midwest and we didn't do any subprime lending and we have the ability to get into the derivatives markets and put on swaps and callers and caps and credit default swaps and just chose not to do it, really chose a Warren Buffett mentality-if we don't understand it, we're not going to jump into it. And so we've avoided all those pitfalls."

This has nothing to do with it being a state-owned bank and everything to do with conservative investing strategies and investing in an up economy.

Yay North Dakota!
Also, the economy isn't in the crapper in ND like it is most everywhere else. It's down, I'm sure, but not nearly as bad.
Also, people are pretty down to earth there. You won't see hardly any BMW's. (Although you might see some nice trucks. Once I was cutting through the parking lot of the Fargodome one day, and the lot was FILLED with nothing but new trucks. I thought maybe there was an overstock sale or something on trucks, but nope, it was just a farmer's convention.)

@Saboth: SSSHHH! don't give them any ideas.

@projoe1979: And "government failures" designed to fail by those with a vested interest in it failing does not prove much except private wealth tends to corrupt the public good and steal the Commonwealth from everyone - regardless of Party affiliation or class.

Read Thomas Frank's "The Wrecking Crew" to see good examples of how it's done. No accident that Abramoff and the rest of the College Republican alumni did a lot behind the scenes to make CERTAIN that there would be a LOT of "government failures." Reagan was the beginning, but GW Bush has been the pinnacle. The jury's out on Obama, but some of his moves have been progressive.

Two examples:

1) By design, put incompetent and/or political hacks into positions of power in agencies you don't like. If they do anything at all, they will most probably do it badly - propaganda for the "government is the problem" myth. REALLY it demonstrates that the "C.E.O." Executive Branch (Private Industry wolves in government sheep's clothing) making the decisions is the real problem. Heck of a job, Brownie.

2) Privatize, Privatize, Privatize every last piece of the public good and service to benefit your political benefactors. No bid contracts are preferable, and cost overruns are a darn shame, but ok.... Unaccountable power of private industry means that you won't even have a way to compare to the way "government" performed the task. Ignore obvious contradictions, and keep repeating the Big Lie that "government is the problem." If anyone disagrees, point them to the results of the first example above.

The important part:
The Bank does have an account with the Federal Reserve Bank, but it is not insured by the Federal Deposit Insurance Corporation, instead being guaranteed by the State of North Dakota itself.

@ZalmanMacGuyver: i can haz, pleez?

They avoided shareholders clamouring for higher profits when everyone else was galumphing along withoug regards for what they were really doing. I work for one of the Canadian banks that made money and we thank those people in charge of some of our policies for enforcing sanity on us.

This is hardly a shining example of how Government can do a better job running a bank then private enterprise. North Dakota is in the midst of a huge economic upswing thanks to the fairly recent discovery and recovery of oil. If your entire business is focused on serving North Dakota right now, you'd have to TRY to make a your bank fail to affect any kind of negative outcome.

The Bank of North Dakota lent me money to go to college. Now I'm paying it back. A lot of the profit earned by the bank comes through its student loan holdings. All that profit goes into the general fund, which the legislature can use to pay for anything in the state budget.

Unfortunately, the state budget doesn't include sufficient funding for higher or lower education in the state. Add to that the out-migration of qualified student graduates (I'm an exception, working at a non-profit in water-logged Fargo) and that the current governor used to run the bank and is well aware of all of this.

There's a lot of resentment towards the bank on the part of young people, despite the good work it does otherwise.

Being originally from ND, and having just paid off my student loan from them, I'd like to say that the government in ND, and the government in DC are two completely different animals. In DC, they waste Billions and Billions of dollars. There is always more to waste, (so they think), and it's no big deal.

In ND, if the Emergency Medical Services Association, or EMS association, buys itself a few drinks with dinner, and they got money with a state grant, there is hell to pay. Google it. You'll find it easily.

2 different mentalities.

@PGibbons: Banking is hardly a true private enterprise when they are forced by the government to meet quotas for loans. Remove all of those types of restrictions and let's see where that gets us.

@rugman11: So Warren Buffet, although all the way in Nebraska, still managed to spare North Dakota from the banking/economic woes of the rest of the world. Is there anything that man can't do? We need to bottle up his cherry coke-drinking, cheese burger-eating greatness and save it for posterity.

@ZalmanMacGuyver: I'm thinking a few new levies might be nice. But that's sort of socialist, so I guess tax refunds would be better.

@whydidnt: "Fairly recent"? Oil was discovered in ND in 1951 and has been a major source of income for the western half of the state since then. The '70's were bad, the early '80's were good. The recent discovery to which you might be referring is the Bakken reservoir which has become affordable top drill with advances in directional drilling and rising oil prices.

I lived in Williston, ND from 1969-1987. The town went from about 12,000 people in 1980 to more than 20,000 in a special census done in 1984. Oil is not a recent discovery and the towns reliant upon that business have had the same ups and downs as the rest of America, but a little out of phase since higher oil prices are better for the populace.

Also, as others have mentioned, the conservative attitude of ND businesses probably has more to do with the balance sheet than the oil situation. I would wager that there are far fewer "interest-only" loans or other non-traditional mortgages than there are in other states.

@Reid Antonacchio: Please provide the link that says that the government forced banks to make loans. The law that FoxNews (and by extension you) refer to says that you can't discriminate against people based on where they live.

@skloon: I think this was the primary component. The fact that they are state owned, made this long term view possible, not the reason they made money. So, if a bank could actually think long term about its capital, investments, deposits, etc. rather than facing shareholder outrage at only growing 20%, we wouldn't have this problem.

@cmdrsass: If the news is accurate and correct, I don't care where it comes from.

@ARP: Governments tend to create sinecures and squander money too, but they are too bureaucratic and lazy to come up with complicated schemes to steal fantastic amounts of money on their own.

@SnaLanKoat_GitEmSteveDave: Totally fascinating, I had to sit in my parked car to hear the end.

@Ninja007: ND has a crap ton of technology. Microsoft has a HUGE campus here. Lots of microtechnology on the University campuses here as well. Much aerospace as well.

We're kicking this flood's ass. Things will be back to normal in a week. No worries people.

@ZalmanMacGuyver:
They should probably spend it on ways to keep the younger generation from splitting town after college. I remember when i worked in Washington DC for North Dakota (hard to believe, lol) it was a big concern. They kept talking about how way too many young kids go out of state for college and never return.

@PGibbons: God already smote them. They live in North Dakota.

Whether government can do things as good as private enterprise, or not, depends on what metric is used to evaluate the performance. If the metric is how rich it makes CEOS and Wall Street investors rich, then I'd say government has a poor track record in running businesses.

@ZalmanMacGuyver:

Natural resource-based economy plus declining population, I guess.

Hmm. $4 billion in assets? When you scale the size of the financial institution down to that size it is a lot easier to manage and get through hard times. Banks like Wachovia have $1,400 billion, Bank of America has $665 billion and SunTrust has $170 billion under management. A financial of that size is significantly less flexible. I work for a regional financial institution as a financial analyst and can tell you based on the peer analysis of the Central Florida region alone that there are half a dozen financial institutions larger. There are regional credit unions larger than the state bank of North Dakota here. That being said, a majority of the smaller banks are in a much more stable position finanically than the mega-banks are so it isn't unreasonable that this bank is doing alright even discounting the upswing in the North Dakota economy locally. The fact that they are the depositor of state funds and loaner of federally-insured student loans gives them a HUGE advantage over most financial institutions too in the way of stability.

Also helping out I'm sure was the fact that since the bank of North Dakota was not driven by share price (similar to the credit union structure), there was a lot less pressure to invest in exotic investments. I'm not noting that investing in the subprime garbage was ever a good thing, just that being state owned allowed them to think more long term than their share-price watching banking cousins were.

@Ninja007: Never been there, I see.

Every town in North Dakota with more than 5000 people has a college or university, with the accompanying resarch. There's also a not insignificant military presence.

Plenty of things going on in North Dakota.

@PGibbons: Strangely, I think about this principle every time I flush my toilet.