What a Public Bank Can Do for Real People

Oscar Perry Abello talks with Sylvia Chi and Kurtis Wu from the California Public Banking Alliance. YES! Magazine takes a deep dive into the Bank of North Dakota, the only state-owned bank in the nation and explores how public funds can be redirected to empower local communities.

The little city of Hazen, North Dakota, population 2,300, is the kind of town where farming and ranching families often have a second income from a job at a power plant or a coal mine.

As a teenager, Christie Obenauer, née Huber, frequently made the hourlong drive from Hazen to Bismarck, the state capital, to go shopping with her sister. On the way, they’d usually make a stop to run an errand for their dad, who ran Union State Bank of Hazen.

“We would back up that giant Buick to the back of the old Bank of North Dakota building, they loaded it up with money, and we’d cover it up with a blanket, close the trunk, go to the mall, and come home,” Obenauer says. “That was a different time. Everyone just knew we were the Huber girls.”

Obenauer is the fourth generation in her family to run Union State Bank. Founded in 1908, the bank today holds $130 million in deposits and has $147 million in loans, investments, and other assets. Obenauer still sends her staff on regular trips to pick up coin and currency in Bismarck—just don’t ask her what car they drive.

Though it’s a tiny institution in a tiny city, Union State is able to do many things normally beyond the reach of a bank of its size. It served as the lead local lender for a $30.5 million medical center that opened in 2016, combining state and federal loans, another federal loan guarantee, and cash from the regional health system. Obenauer describes how her bank partnered with the medical center, Basin Electric, and a few other local employers to convert a former church into a cooperatively owned child care center that now serves 88 kids. She also notes that her bank helped finance manufactured housing for new workers attracted by the shale oil boom. The Bank of North Dakota was an instrumental secondary market to buy those mortgages, taking up the long-term risk in the way Fannie Mae helps local lenders across the country.

While there is certainly a lot that’s unique about Hazen, Union State Bank, and Obenauer’s path to becoming a fourth-generation community banker, it is not unusual in North Dakota to find a little bank punching far above its weight. That’s just how banking works in this state, largely because of the century-old Bank of North Dakota, the only state-owned bank in the country.

All of North Dakota’s state tax and fee revenues get deposited by default into the Bank of North Dakota. Prohibited by law from competing with the private sector, it has no branches or ATMs, and other than student loans, the bank rarely originates or services loans directly to people or businesses. If you want to open an account and deposit your own money into the bank, you have to go in person to the main office in Bismarck, and you also have to be a North Dakota resident.

The Bank of North Dakota operates primarily as a bankers’ bank, partnering with local financial institutions to leverage the state’s deposits in ways designed to strengthen local banks and credit unions.

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