A state bank?

One state that seems impervious to the recession is North Dakota. It’s unemployment rate is 4.8 percent, which is a half-percent less than a year ago.

Why is this? Some would say it has to do with North Dakota’s state-owned bank, a socialist endeavor, started in 1919, that provides cheap business loans, mortgages and student loans, and that acts as the repository for state tax revenues. Over the last 10 years, the bank has returned $300 million to the state treasury. A number of states, especially Michigan, are wondering whether to follow this example. (Read a balanced report on it here.)

The bank, supporters say, acts as a mini Federal Reserve for the state. It helps North Dakotans take care of their own problems, rather than relying on Washington to help ease credit woes. However, its deposits are not FDIC insured. State taxpayers would be on the hook in case the bank began to fail.
My concerns ought to be obvious. A state-owned bank would be subject to political whims and pressures. Fannie and Freddie showed us the dangers with this model. North Dakota may be a special example, and there likely are other reasons its economy is doing well. In any event, its bank was started many years ago and has a long history and tradition behind it. Starting a new state bank under current economic conditions would be expensive and risky. I like this Detroit News editorial on the subject.
What do you think of this idea? Should your state pursue it?