100 Years Ago, Farmers and Socialists Established the Country’s First Modern Public Bank

North Dakota’s radical history carries valuable lessons for today’s public banking movement.

Thomas M. Hanna and Adam Simpson

The populist Nonpartisan League–and its newspaper, the Nonpartisan Leader—successfully pushed for a public bank in North Dakota 100 years ago. ((1919) The Nonpartisan Leader, 9, Minneapolis: National Nonpartisan League/Wikimedia Commons)

One hun­dred years ago July 28, a bank in Bis­mar­ck, N.D., opened its doors for the very first time. This would have been an unre­mark­able event, like­ly lost to his­to­ry, except for the fact that it was a pub­lic bank, owned by all the res­i­dents of the state. A cen­tu­ry on, the Bank of North Dako­ta (BND) is still the only pub­licly owned bank in the con­ti­nen­tal Unit­ed States (a sec­ond pub­lic bank was recent­ly estab­lished in Amer­i­can Samoa) — though poten­tial­ly not for long.

In the years since the financial crisis, vibrant campaigns for public banks have emerged all across the country.

The BND is enjoy­ing renewed time in the lime­light as activists look to the insti­tu­tion as an exam­ple of how to regain demo­c­ra­t­ic con­trol over finance, and in the process con­front a myr­i­ad of press­ing prob­lems from the cli­mate cri­sis to gen­tri­fi­ca­tion. Rather than hav­ing pub­lic funds be extract­ed from local com­mu­ni­ties to fuel Wall Street spec­u­la­tion, pub­lic banks can ensure that those funds are used to sta­bi­lize local economies and sup­port local pub­lic pri­or­i­ties. As Ellen Brown, chair of the Pub­lic Bank­ing Insti­tute, writes in her new book, Bank­ing on the Peo­ple, a pub­lic bank­ing sys­tem … can fund the goods, ser­vices and infra­struc­ture required to sat­is­fy the needs of the peo­ple and the econ­o­my with­out unsus­tain­able debt, tax­a­tion or envi­ron­men­tal degradation.”*

That a pub­lic bank is res­onat­ing with peo­ple across the Unit­ed States today shouldn’t be sur­pris­ing. If we look back at the con­di­tions that led a diverse group of farm­ers, social­ists and pop­ulists to strug­gle against the odds to cre­ate the BND in the first place — cor­po­rate dom­i­na­tion, an econ­o­my hob­bled by debt bur­dens, gap­ing inequal­i­ties, inef­fec­tive reformists, bought politi­cians —we find they are remark­ably sim­i­lar to those we face today in our new gild­ed age.”

At the dawn of the 20th cen­tu­ry, the remote and rel­a­tive­ly new state of North Dako­ta was firm­ly under the con­trol of cor­po­rate inter­ests. Heav­i­ly indebt­ed small farm­ers and small busi­ness­peo­ple were behold­en to terms set by out-of-state rail­road com­pa­nies and grain monop­o­lies (both backed by big cor­po­rate banks) in order to access broad­er mar­kets. The rail­roads in par­tic­u­lar (which owned vast swathes of land in the state) were per­ni­cious tax avoiders, depriv­ing the gov­ern­ment of des­per­ate­ly need­ed devel­op­ment funds. The state gov­ern­ment was eas­i­ly cap­tured by these pow­er­ful inter­ests and was, for a time, essen­tial­ly under the con­trol of a cor­rupt for­mer rail­road agent named Alexan­der McKen­zie and the Repub­li­can polit­i­cal machine he ran. Ear­ly activist efforts to break this polit­i­cal and eco­nom­ic stran­gle­hold through reg­u­la­tion and legal action were under­mined by threat­ened cap­i­tal strikes (for exam­ple, cor­po­rate own­ers threat­ened to close their grain ele­va­tors when faced with reg­u­la­tion in 1891). Ulti­mate­ly, these reform efforts had no answer to the cen­tral prob­lem: that the large cor­po­ra­tions of the day had the pow­er to dic­tate eco­nom­ic con­di­tions and rela­tion­ships and the state lacked the finan­cial means to advance alternatives.

In 1915, for­mer Social­ist Par­ty orga­niz­er and flax farmer Arthur C. Town­ley formed the Non­par­ti­san League (NPL), which, among oth­er things, advo­cat­ed for worker’s com­pen­sa­tion, a grad­u­at­ed state income tax, and pub­lic own­er­ship of banks, mills, ware­hous­es, insur­ance pro­grams and oth­er enter­pris­es as a way of wrest­ing eco­nom­ic pow­er from the cor­po­ra­tions. Buoyed by wide­spread sup­port among farm­ers, NPL-backed can­di­dates won elec­tions in 1916 and 1918, gain­ing con­trol of the state leg­is­la­ture and gov­er­nor­ship. Once in office, they began to imple­ment their rad­i­cal yet pop­u­lar eco­nom­ic agenda.

In July 1919, the BND was launched with $2 mil­lion in cap­i­tal and a require­ment that all state and local gov­ern­ment funds be deposit­ed in the bank. With these funds and pop­u­lar sup­port, the BND was able to endure an ear­ly Wall Street coun­ter­at­tack, name­ly a boy­cott of the state’s bonds. The BND sur­vived, and ulti­mate­ly thrived, despite the fact that the NPL was not able to with­stand the polit­i­cal reac­tion to its suc­cess. Oppo­nents orga­nized the Inde­pen­dent Vot­ers Asso­ci­a­tion, a cor­po­rate-fund­ed effort that hoped to see the exper­i­ment dashed, declar­ing dur­ing the 1920 race that the real issue in the cam­paign in the state is between Amer­i­can­ism and social­ism.” NPL can­di­dates lost con­trol of the low­er house of the leg­is­la­ture after those elec­tions, the new law­mak­ers passed mea­sures under­min­ing NPL poli­cies and gov­er­nor Lynn Fra­zier was nar­row­ly recalled in 1921.

While the NPL’s polit­i­cal for­tunes revived dur­ing the depres­sion of the 1930s and the par­ty exists to this day as part of the state’s offi­cial Demo­c­ra­t­ic Par­ty affil­i­ate, the impor­tant les­son for activists today is how suc­cess­ful, pop­u­lar and ulti­mate­ly resilient insti­tu­tions like the BND (and the accom­pa­ny­ing pub­licly owned grain mill and ele­va­tor) became once they were established. 

Between 1919 and 1933 the BND lent almost $41 mil­lion to more than 16,000 farm­ers in the state, and dur­ing the Great Depres­sion the bank helped the state unique­ly sus­tain itself and recov­er quick­ly (fore­shad­ow­ing sim­i­lar suc­cess in help­ing the state with­stand the 200809 finan­cial cri­sis). While school teach­ers across the coun­try were being paid essen­tial­ly in IOUs that were typ­i­cal­ly redeemed with a 15% loss, the BND was able to pay them in full. In the 1940s, farm­land that was fore­closed on dur­ing the Depres­sion was sold back, in many cas­es, to the same fam­i­lies that lost them.

In 1945, the bank began to return a por­tion of its prof­its to North Dakota’s gen­er­al fund — the first of more than $1 bil­lion total that has been returned to the state over the decades, help­ing to fund var­i­ous state ser­vices. In 1967 it made its first fed­er­al­ly insured stu­dent loan, and today the bank admin­is­ters its own stu­dent loan pro­gram that pro­vides North Dako­ta res­i­dents (and those attend­ing North Dako­ta col­leges) with a vari­ety of ben­e­fits (includ­ing low/​competitive inter­est rates, no fees and refi­nanc­ing options after col­lege). Today, BND may not be the social­ist engine many NPL plan­ners had in mind (it works with rather than com­petes with or dis­places pri­vate sec­tor banks, for instance), but it is, as Gov. William Guy (D‑NPL) advo­cat­ed for in the 1960s, an engine for eco­nom­ic devel­op­ment” in the pub­lic inter­est. Last year, BND report­ed $159 mil­lion in net earn­ings, with a total $7 bil­lion in assets and a loan port­fo­lio of $4.5 billion.

While the Bank of North Dakota’s record is impres­sive, it is impor­tant not to lose per­spec­tive. As a pub­lic insti­tu­tion, it is ulti­mate­ly account­able to the demo­c­ra­t­ic insti­tu­tions of the state, a state that has changed con­sid­er­ably in the past 100 years and is now dom­i­nat­ed by the Repub­li­can Par­ty polit­i­cal­ly and increas­ing­ly by the oil and gas indus­try eco­nom­i­cal­ly. Recent­ly, the BND was wide­ly, and right­ly, crit­i­cized for lend­ing the state as much as $10 mil­lion to cov­er the costs of polic­ing the Amer­i­can Indi­an-led Stand­ing Rock protests against the Dako­ta Access Pipeline.

Yet despite these risks, it is this promise of demo­c­ra­t­ic con­trol of finance that is most appeal­ing to today’s activists.

In the years since the finan­cial cri­sis, vibrant cam­paigns for pub­lic banks have emerged all across the coun­try, seek­ing to resist cor­po­rate dom­i­na­tion and elite con­trol and build new, more equi­table and sus­tain­able insti­tu­tions. Some of the most advanced cam­paigns are in Cal­i­for­nia. Fol­low­ing a 2018 ref­er­en­dum loss in Los Ange­les (where 42% — near­ly half a mil­lion peo­ple — vot­ed in favor of a pub­lic bank), activists have tak­en their fight to the state leg­is­la­ture. Recent­ly, a statewide bill to clear some road­blocks for the estab­lish­ment of local and region­al pub­lic banks passed the Gen­er­al Assem­bly and has moved on to the State Sen­ate (where it passed two key com­mit­tees in June and July).

What­ev­er the bill’s ulti­mate fate, the cam­paign that the Cal­i­for­nia Pub­lic Bank­ing Alliance has put togeth­er is tru­ly remark­able. More than 100 orga­ni­za­tions rep­re­sent­ing 3.3 mil­lion Cal­i­for­ni­ans have endorsed the bill. These include labor unions (such as the Cal­i­for­nia Nurs­es Asso­ci­a­tion, SEIU Cal­i­for­nia, AFSCME Cal­i­for­nia and UFCW West­ern States Coun­cil), com­mu­ni­ty groups (such as Peo­ple Orga­niz­ing To Demand Envi­ron­men­tal and Eco­nom­ic Rights and Health­care for All- Cal­i­for­nia), envi­ron­men­tal groups (such as 350​.org, Friends of the Earth and the Local Clean Ener­gy Alliance) and polit­i­cal orga­ni­za­tions (such as the Cal­i­for­nia Demo­c­ra­t­ic Par­ty and the Green Par­ty of Cal­i­for­nia). More­over, 10 city gov­ern­ments have backed the effort, includ­ing Los Ange­les, San Fran­cis­co, Oak­land, and San Diego. 

In Cal­i­for­nia and else­where in the coun­try, pub­lic bank­ing has very quick­ly moved from a fringe inter­est to a main­stream polit­i­cal issue. This is tes­ta­ment to both the long-term suc­cess of exam­ples like the Bank of North Dako­ta and to the efforts of a new gen­er­a­tion of activists and move­ment builders who, like their pre­de­ces­sors 100 years ago, under­stand how crit­i­cal­ly impor­tant con­trol of finance and cap­i­tal is to the hope of build­ing a more equi­table, just and demo­c­ra­t­ic world. 

*Ellen Brown is also a fel­low at The Democ­ra­cy Col­lab­o­ra­tive, where the authors work, and Bank­ing on the Peo­ple was pub­lished by The Democ­ra­cy Collaborative.

Eds. note: An ear­li­er head­line inac­cu­rate­ly described the Bank of North Dako­ta as the coun­try’s first pub­lic bank; in fact, pub­lic banks had exist­ed in pre­vi­ous cen­turies. How­ev­er, the Bank of North Dako­ta was the coun­try’s first mod­ern pub­lic bank, and remains the only such insti­tu­tion in the con­ti­nen­tal Unit­ed States.

Thomas M. Han­na is research direc­tor at The Democ­ra­cy Col­lab­o­ra­tive and author of Our Com­mon Wealth: The Return of Pub­lic Own­er­ship in the Unit­ed States. Adam Simp­son is a pro­gram asso­ciate at The Democ­ra­cy Col­lab­o­ra­tive where he hosts The Next Sys­tem Pod­cast. He is also a co-host of the pod­cast Future Left.
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