But North Dakota is also red in another sense: it fully supports its state-owned Bank of North Dakota (BND), a socialist relic that exists nowhere else in America. Why is financial socialism still alive in North Dakota? Why haven't the North Dakotan free-market crusaders slain it dead?
Because it works.
In 1919, the Non-Partisan League, a vibrant populist organization, won a majority in the legislature and voted the bank into existence. The goal was to free North Dakota farmers from impoverishing debt dependence on the big banks in the Twin Cities, Chicago and New York.
More than 90 years later, this state-owned bank is thriving as it helps the state's community banks, businesses, consumers and students obtain loans at reasonable rates.
It also delivers a handsome profit to its owners -- the 700,000 residents of North Dakota. In 2011, the BND provided more than $70 million to the state's coffers. Extrapolate that profit-per-person to a big state like California and you're looking at an extra $3.8 billion a year in state revenues that could be used to fund education and infrastructure.The first question: why is a state-run bank any different than JPMorgan or Bank of America?
Somehow the Bank of North Dakota doesn't seem to function along the tenets of Karl Marx. To me, it seems, the Bank has simply morphed into a bank like any other bank -- except that it is run by the state. So?
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A socialist economic system would consist of a system of production and distribution organized to directly satisfy economic demands and human needs, so that goods and services would be produced directly for use instead of for private profit driven by the accumulation of capital. Accounting would be based on physical quantities, a common physical magnitude, or a direct measure of labour-time in place of financial calculation. Distribution would be based on the principle to each according to his contribution.That last line is not intuitively easy to grasp. It's an accurate Marxist tenet but it has boundaries.
The farmers, in 1919, who set up the bank, just like the farmers today, are about as capitalistic as anyone. I doubt any North Dakota farmer would consider himself/herself a socialist, and certainly not a Marxist. (Interestingly, the Marxists seemed to be internally inconsistent: Distribution would be based on the principle to each according to his contribution versus the oft-quoted Marxist slogan "to each according to his need.")
The Bank of North Dakota does not control the production and distribution of agricultural products (or any product) to directly satisfy economic demands and human needs of North Dakota. It was simply put in place because a) the farmers did not trust banks on the East Coast; b) there were no banks large enough in the midwest to meet their needs; c) they did not trust banks in general; and/or d) they did not see why they should "give" some of their money to other banks when they could do it themselves. I don't see any "socialism" in that. A bunch of guys put together a bank; called it the Bank of North Dakota; and chartered it through the state. As far as I know, it uses commonly accepted banking rules and processes.
Certainly, the Bank of North Dakota is not using labor-time in place of financial calculation.
At a stretch, the bank might be considered a co-op but a co-op is certainly not socialism.
Bottom line: suggesting that the Bank of North Dakota is part of a socialist economic system is an urban legend. Anyone who suggests the Bank of North Dakota is a socialist institution has gone no further than looking at the name of the bank and relating the party / movement that founded the bank to socialism. I doubt there are many farmers in North Dakota today or in 1919 when the bank was established who consider themselves socialists. In fact, the entire notion that the Bank of North Dakota is a socialist institution is pretty much destroyed by wiki's description of the bank.
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Speaking of banks, the situation for large depositors in the Cyprus banks are much, much worse than initially reported.
Depositors in Bank of Cyprus will get shares in the bank worth 37.5 percent of their deposits over 100,000 euros, the source told Reuters, while the rest of their deposits may never be paid back.Originally, depositors with greater than 100,000 euros were expected to lose between 20 and 40 percent of their deposits.
Now a) they lose 62.5 percent right off the top; and, b) the rest of their 37.5 percent deposits are converted to shares in the bank. Something tells me these shares will be pretty worthless a year from now. One can only assume the Bank of Cyprus will not even exist a year from now except as an empty shell.
This, of course, ends the "reason" for the Bank of Cyprus in the first place, as a place to launder money, and as a bank for large depositors to avoid paying taxes (or worse, having their money confiscated in their home country, i.e., Russia. One wonders if this was not the intent of the EU from the get-go but to pull this off Cyprus itself needed to request a bailout.
Something tells me there will be no overt run on banks in the PIIGS, but depositors there will quietly move their assets to Benelux, Germany, France, England, or the US.