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Vermont Considering a State Bank

By Pat Bradley

http://stream.publicbroadcasting.net/production/mp3/wamc/local-wamc-1003431.mp3

Montpelier, VT – In 1919, North Dakota formed the only State Bank in the nation. Currently most of its deposits come from the state government; its loans are primarily student and commercial. Deposits are not backed by the FDIC, but rather the state. About two-thirds of its profits are returned to the state. In times of fiscal duress other states have looked to that institution as a template to create a similar institution. But no other state has yet to follow thru and set up a state bank. Vermont is currently considering legislation that would create a panel to recommend proposals for the creation of a state bank. Representative Suzi Wizowaty is the lead sponsor of the House bill.

Vermont Bankers' Association President Chris D'Elia says the legislation is a waste of time.

The Vermont Legislature's Joint Fiscal Office issued a study of the idea. Chief Fiscal Officer Stephen Klein says banking has changed since the North Dakota state bank was created.

Last summer, a commission set up by the Massachusetts Legislature rejected formation of a state bank. In May, the New England Public Policy Center, a division of the Federal Reserve Bank of Boston, had issued the study "The Bank of North Dakota: A Model for Massachusetts and other States?" by Public Policy Center Director Yolanda Kodrzycki and Senior Research Assistant Tal Elmatad.

At least 9 states have considered studying or creating a state bank. New York considered establishing such an institution in the mid-1970's but the legislation failed.