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It was fed-up farmers who started the only government-run bank in the U.S.


Public banks are government owned. Across the globe, they show up from Canada to Chile. But across the 50 United States, there's just one. From NPR's daily business podcast, The Indicator, Wailin Wong and Adrian Ma take us there.

WAILIN WONG, BYLINE: The Bank of North Dakota was founded in 1919, and it's the only public bank within the 50 United States. To learn more about it, we talked to a guy named Eric Hardmeyer, who used to be the bank's president until he retired a couple of years ago.

ADRIAN MA, BYLINE: Eric says the Bank of North Dakota came out of a grassroots movement led by farmers 'cause these farmers felt like they were not getting a fair shake from the financial system.

ERIC HARDMEYER: The farmers at that point were very upset with what they felt to be unfair practices by bankers and just their inability to market their grain and get a good price.

WONG: The farmers wanted agricultural infrastructure, like mills and storage facilities, put into government hands. They later landed on the idea of a government-owned bank. So here's how it works and what makes it different from a private bank or a credit union. With a private bank, ownership is in the hands of private investors. Think of people who own stock in JPMorgan Chase or the individual members of a credit union.

MA: But a public bank is owned by a government entity like a municipality or, in the case of North Dakota, the state government. And it's that same government that supervises a public bank. Now, this is another key difference between public and private banks - private banks are overseen by regulators like the Federal Reserve.

WONG: In North Dakota, all the money that the state government collects gets deposited at the public bank. We're talking tax dollars, revenues from fees, that kind of thing. The bank, in turn, loans out money within the state. Eric says the Bank of North Dakota partners with private banks on these loans.

HARDMEYER: It's important to partner with the financial institutions rather than compete with them. One, it doesn't make, you know, an enemy out of the private sector. And secondly, it allows you to leverage your own funds with private sector funds.

MELISSA MARQUEZ: They perform well. Profitability goes back to the state. So why wouldn't we do this? Why should the profits go into private hands when it could be returned to the public?

WONG: That's Melissa Marquez, CEO of Genesee Co-op Federal Credit Union in Rochester, N.Y. She's part of a group trying to start a public bank in Rochester. Melissa and other public banking advocates point out that when city and state governments keep their money - like your taxpayer dollars - in big Wall Street banks, that money doesn't always circulate locally. Melissa says a public bank in Rochester would keep money local.

MARQUEZ: The role of the public bank is to kind of, like, stretch and take risks that banks aren't comfortable making. So money - local money and the people's money - needs to get put into those gas tanks.

WONG: But private banks say they are putting enough gas in those tanks. Major banking associations oppose public banks. They see them as redundant to the lending that commercial banks already do.

MA: And they also point out that because public banks are not supervised by regulators like the Fed, that makes public banks less safe and more vulnerable to political pressure.

WONG: Still, advocates like Melissa Marquez continue to push for their vision of an alternative financial system. They're lobbying lawmakers in states like New York and municipalities from Los Angeles to Philadelphia to create public banks.

MA: Adrian Ma.

WONG: Wailin Wong, NPR News.

(SOUNDBITE OF ENDORF'S "CIGARETTE") Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Wailin Wong
Wailin Wong is a long-time business and economics journalist who's reported from a Chilean mountaintop, an embalming fluid factory and lots of places in between. She is a host of The Indicator from Planet Money. Previously, she launched and co-hosted two branded podcasts for a software company and covered tech and startups for the Chicago Tribune. Wailin started her career as a correspondent for Dow Jones Newswires in Buenos Aires. In her spare time, she plays violin in one of the oldest community orchestras in the U.S.
Adrian Ma
Adrian Ma covers work, money and other "business-ish" for NPR's daily economics podcast The Indicator from Planet Money.