The Herald was seeing red a century ago this week - red as in Marxism.
"For the first time in history there exists in the United States a Socialistic commonwealth," the Herald's review of the news of the week declared.
While the Herald groused, legislators celebrated. On Feb. 25, 1919, Gov. Lynn J. Frazier signed bills creating the North Dakota Mill and Elevator and the Bank of North Dakota "to the accompaniment of music and amid the waving of flags and the clicking of moving picture machines," the Herald reported.
Opposition to the League and its program didn't end with the victory celebration; within months, the bills had been referred to voters and tried in the U.S. Supreme Court. They passed both tests. In 1921, Frazier and other League officials were recalled from office, but voters rejected measures that would have closed the state-owned businesses, and the Bank and the Mill survived to be celebrated once again.
Monday, February 25, 2019, the anniversary of the legislation, will be "Bank of North Dakota Day" in the state, as proclaimed by the Legislature in a resolution sponsored by the floor leaders of both political parties. Yes, the state now regarded as among the most conservative in the nation operates a state-owned bank - the only one in the United States. Other states had experimented with state-owned banks, but none of them survived.
North Dakota wasn't quite three decades old when the Bank and the Mill and Elevator were created. The movement to create them has achieved an almost mythic status in North Dakota history, a kind of battle between righteous farmers and evil special interests. As with all origin stories, there's a fair bit of exaggeration and some invention in the Bank's story, but you really can't argue with the numbers. Here are the Bank's business results for 2017: Net earnings were $145.3 billion; capital reserves were $825 million; total assets were $7 billion. For 2018, earnings are expected to be $150 million - a tidy sum to celebrate the bank's centennial.
Clearly the Bank is much more than a relic of a bygone era.
The Bank resembles commercial banks, but it operates in unique ways. The Bank is a captive depository; by law all of the state's collections, including taxes, are deposited with the Bank. The Bank loans money, charges fees and collects interest. Whatever profits the Bank realizes are reinvested in the Bank. These are returned to stockholders - the state's citizens - in several ways, most directly as transfers to the state general fund, which helps keep state taxes low.
Since 1945, more than $1 billion has been returned to the state, $811 million to the general fund and $227 million to fund infrastructure, housing, disaster programs, technology and other expenses arising in the state and its subdivisions.
The Bank has been innovative in its programs; it was a pioneer in student loans, beginning farmer programs and community-assisted economic development projects. Mostly these involve partnerships with local banks; the state Bank participates in loans originated by local, commercial banks. Disaster relief is another important role, as Grand Forks learned in 1997 and other cities have come to appreciate.
The Bank's role in disaster assistance began in the 1930s, when the Bank developed a lending program that helped keep farmers on the land. After World War II, it made real estate loans to returning veterans; in the 1960s student loans became a major line of business.
The Bank of North Dakota is a creature of the state and a product of the state's political culture, so it reflects the aspirations and the struggles of its founding generation. At the same time, it continues to get North Dakota apart from other states, because the Bank is the only one of its kind in the nation.
The Bank of North Dakota has attracted attention since it opened a century ago. It is, as Publisher Bacon argued, a "socialistic" institution, since it is owned by the government. Rather than the threat that Bacon foresaw, however, the Bank has become a tool to "encourage and promote agriculture, commerce and industry in North Dakota," its founding mission statement.
Of course the Bank's history isn't without its dark moments, of course, but over the decades its roles have been accepted and expanded, to the point that the Bank's uniqueness and its success have been accepted and celebrated. The Herald's apocalyptic vision proved faulty; North Dakota didn't become a "socialist commonwealth".
While North Dakota probably couldn't "get by with" establishing a state-owned bank in today's political climate, it also can't get by without the Bank, which has become an integral part of the state's economy.
Jacobs retired as publisher of the Grand Forks Herald in 2014. He is the author of a centennial history of the Bank of North Dakota. At 2 p.m. on March 3, he'll discuss the origins of the Bank at the Grand Forks County Historical Society's "Entertaining History" series.