By JASON COX
Of the Keizertimes
What if state reserves were put to work generating credit – and, hopefully, jobs – right here at home?
It’s not a totally radical concept, but only one state so far has tried it.
And a group of Oregonians want our state to be the second.
Supporters of Oregonians for a State Bank came to Keizer in May pitching the idea at Porter’s Pub. Steve Hughes, who doubles as state director of the Oregon Working Families Party, said it was rooted in watching the financial crisis of 2008, where banks once considered unsinkable were teetering on the brink of failure.
“Our pensions and such things were on the line, but we felt we had little control over those decisions,” Hughes said.
The inspiration comes from North Dakota, where the state-owned Bank of North Dakota started in 1919 in part to extend credit to North Dakotans who couldn’t get a loan from East Coast-based financial institutions. By law it holds all deposits from state institutions and departments.
The bank does this through direct lending and participation loans, where a private bank provides a portion of the principal and the government-owned bank steps in for the rest. The federal government already does this to an extent; think Small Business Administration and USDA lending.
The concept has caught the interest of some Oregonians due to three numbers from the U.S. Bureau of Labor Statistics: 8.7 percent, 9.6 percent and 3.3 percent.
The first is the nationwide, seasonally adjusted unemployment rate. The second jobless rate belongs to Oregon. The third? North Dakota, the state with the lowest unemployment rate in the country, almost a full percentage point lower than Nebraska, with 4.2 percent.
State bank proponents aren’t pretending a similar institution would take Oregon’s jobless rate to North Dakota’s numbers: For one, its southern neighbor boasts a mere 4.9 percent unemployment, and many other Great Plains states, at least by the numbers, aren’t suffering from joblessness the way much of the rest of the country seems to be.
“And they have a budget surplus,” Hughes added. “I would say it’s hard to ignore the fact they’re also experiencing an oil boom there of pretty sizable proportions.”
But he said one step the Bank of North Dakota took was to videoconference with community bankers and ask them, “What do you need to be healthy in this storm? And they worked on solutions. In some cases it was buying bank stock. In other cases it was buying loans. That paid dividends because they haven’t had any bank failures in North Dakota.”
In North Dakota, interest off the deposits goes into the state treasury, its website states.
A bill currently in the Oregon Legislature would create an authority tasked with establishing the framework for the state bank. The concept Hughes and others are pushing would have a scaled-back mission:
• Unlike in North Dakota, proponents here don’t want a state-run bank competing with private financial institutions for personal and business deposits. It would hold state deposits currently held by private banks, but it wouldn’t be open for public deposits.
• The Oregon State Bank as Hughes’ group envisions it would be what he called a “banker’s bank,” working with community banks to participate in loans.
The group’s website is oregoniansforastatebank.org.