The Bank of North Dakota, the only state-owned bank in the U.S., opened on this date in 1919. The Nonpartisan League, during the 1919 Legislature, was instrumental in creating five new laws, including one that created the Bank of North Dakota.
The law required that all state and local government entities deposit funds into the Bank, which was established to promote agriculture, commerce and industry in North Dakota. It is also the only legal depository for all State funds.
With a beginning capital of $2 million, it was to provide low-cost rural credits, finance state departments and enterprises and serve as a clearinghouse and rediscount agency for other banks throughout the North Dakota.
The Industrial Commission, comprised of the governor, the attorney general and the agriculture commissioner, appointed James R. Waters as the first manager of the Bank in April 1919. Though he was experienced in banking, he was unable to find purchasers for the $2 million worth of bonds to furnish the bank’s capital.
However, the Bank opened on July 28, 1919, and treasurers from the North Dakota’s governmental entities began depositing funds as the law required. By September, the deposits amounted to $8.7 million, rising to $28.7 million by April 1920. Banks throughout North Dakota deposited $1.4 million by mid-August 1919.
The Bank of North Dakota also acted as a rediscount bank, lending to other North Dakota banks. The plan was to redeposit public funds in the banks of the communities from which the funds originated.
By the end of 1919, the Bank began making farm land loans, making $2.9 million by mid-November 1920. The price recession in the spring of 1920 hurt the bank. Farmers could not repay their loans, crops were poor for four years and farmers went heavily into debt. To ease the situation, the Bank of North Dakota redeposited $1 million more in the banks of western North Dakota than it had received from those areas.
Though the Nonpartisan League was in disarray by 1921, the Bank of North Dakota continued to operate and, during the depression of the 1920s, the state’s farmers received aid from it.
As he had promised, Governor Ragnvold A. Nestos, who took office in 1921, gave the League enterprise a fair trial. He pushed the rural-credit program, and the Bank’s farm-loan department continued to make farm land loans.
From 1919 to 1933, the Bank lent over 16,000 farmers nearly $41 million at 6 to 6 _ percent interest. However, the drought and depressed prices caused loan payments to become delinquent and, by 1929, the Bank had foreclosed on 8.3 percent of the loans. That rose to 17.3 percent within five years.
The Bank had lost $8.8 million on the rural-credit program by 1936, with losses covered by transfers from various state tax funds. It owned nearly 1.6 million acres of land by 1942.
The Bank became more stable after the Depression. Today, it partners with local banks to provide commercial, farm, residential and other loans and is active in the student loan business and various economic development endeavors.
The Bank of North Dakota has weathered the political and financial storms over the years since 1919 to become the fifth largest source of revenue for the State of North Dakota.
by Cathy A. Langemo