The IVA in Control
The Bank of North Dakota may have survived this assault but it was still on shaky ground. Despite the breakthrough sale of bonds, the negative publicity, legal uncertainty and political confusion created by the recall campaign tarnished the state's image with investment houses making future bond sales problematic. During the recall campaign, Governor Nestos had promised voters to give the Bank and other state industries a fair trial but during a speech in Minneapolis, Nestos declared that steps would be taken by the 1923 Legislature to dissolve the bank.
The Industrial Commission, now IVA members, fired respected bank director-general F.W. Cathro. Thirty-nine bank employees who were League members were also fired. No further bond sales were made. The League charged that the Industrial Commission was deliberately withholding bonds to undermine the solvency of the Bank.
Under the management of the newly appointed director-general C.R. Green, the policies and practices of the Bank underwent a significant change. Under the administration of the League the keyword of the Bank was "service." Under the IVA, the keyword became "profit." The new management threw out millions of dollars of loans applications appraised by the previous League management. It tightened loan practices becoming more conservative in appraisals and setting new loan limits.
The Nestos administration also discontinued the Bank's policy of re-depositing public funds with local banks. While this improved the liquidity and stability of the Bank, it caused money to leave the state. Under the League, only 5% of the Banks assets were deposited in out- of-state banks. Under IVA management, that jumped to 51%.
In the 1923 Legislature, Nestos requested a number of measures that would change or abolish the operation of the Bank and other state-owned industries. The Legislature failed to implement any of Nestos' requests. The session did make provisions for the foreclosure and sale of land financed by the Bank of North Dakota. This measure allowed the Bank to close out many defaulted loans and sell the land to replenish its loan programs. Finally, it seemed the Bank of North Dakota was back in business.