The Long Dry Spell
By the 1920 elections, the Bank of North Dakota had been in operation for more than a year with a shadow on its future. The bank series bonds had still not sold, and the bank's farm loans were frozen without more funds. The ongoing smear campaign against league officials was undermining public confidence in the bank and other industrial programs, especially since undercapitalization meant that farmers weren't seeing the easy access to credit they had been promised.
Langer and other opposition campaigned hard against the League endorsed incumbents in the 1920 primaries, claiming that while they supported the state-owned industries North Dakota voters had already endorsed, they opposed the "corrupt leadership" of the league, promising to throw the Socialists out of government. In the fall election the League lost its control of state government. Opponents gained a majority of the House and all of four anti-league initiated measures passed. The state-owned Industrial program ground to a halt. An initiated measure repealed the 1919 provision requiring municipalities to deposit their funds with the Bank. With the bonds still not sold and an important source of liquidity evaporating, the Bank of North Dakota stopped making farm loans and honoring its checks.
The North Dakota Bankers Association offered to sell the bank series bonds in return for concessions that would have halted any further expansion of the League's Industrial Program. The Industrial Commission refused the offer. A similar offer from Twin Cities’ bankers was also refused.
The long delay in selling the bonds meant that the Bank was dangerously undercapitalized to respond to the agriculture depression of the 1920s. To meet its cash needs, the bank was forced to recall some of its re-deposits with western banks. Eighteen banks closed within three weeks devastating many western communities.