The State of New Jersey took a giant step to establish a state-run bank on Nov. 13. Governor Murphy signed an executive order creating a 14-member "implementation board," which is charged with presenting him with a plan, in a year, that would set the stage for New Jersey to join North Dakota in having a state-run bank.
North Dakota has had a state-run bank since 1919 and began operations with $2 million in capital. The Bank of North Dakota (BND) receives virtually all state funds from fees and taxes and obtains funds from “corporate accounts, North Dakota city and county government entities and North Dakota residents.” Deposits are not FDIC insured, but “all deposits are guaranteed by the full faith and credit of the State of North Dakota.”
The BND’s deposits are used to make agriculture, business, residential, infrastructure and student loans. In addition, “BND follows a conservative investment policy, investing in AAA securities that by the federal government or agencies of the federal government." Moreover, the Bank "maintains adequate reserves and allowance for credit loss to protect itself from credit risk embedded in its loan portfolio."