The Disaster Relief Secret Weapon

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This post originally appeared at

The Public Banking Institute
blog cites a powerful example of how a public bank can help a
city bounce back from a devastating natural disaster. As Hurricane Sandy
recovery efforts unfold, there’s a lesson from history about the role of strong
local financial institutions in increasing urban resilience.

In April of 1997, Grand Forks, North Dakota, was hit by record flooding and
major fires that put the city’s future in jeopardy. One of the first economic
responders was the Bank of North Dakota (BND), currently the only public bank
in the U.S.

What’s a public bank, you ask? Public banks are owned by citizens through their government.
They have a public interest mission, are dedicated to funding local
development, and plow profits back into the state treasury to fund social
programs and cover deficits. Rather compete with private banks, BND partners
with private banks to meet the needs of North Dakotans.
BND is one reason North Dakota
has low unemployment and runs budget surpluses while most
states are deeply in the red

As a public bank, BND was able
to respond to the ’97 flood in ways that a privately owned bank could not or,
perhaps, would not. While Sandy’s wrath cost dozens of lives and an estimated $60
billion, Grand Forks’
suffered $3.5 billion in losses — a lot of damage for a town of 50,000, which
saw flood waters inundate a staggering 75% of area homes. Fortunately, no one

Right after the flood, the Bank
of North Dakota got to work, established a disaster relief loan fund, set aside
$5 million to assist flood victims, and set up additional credit lines of
around $70 million:

  • $15 million for the ND Division of
    Emergency Management
  • $10 million for the ND National Guard
  • $25 million for the City of Grand Forks
  • $12 million for the University of North Dakota,
    located in Grand Forks
  • $7 million allocated to raise the
    height of a dike at Devil’s Lake, about 90 miles west of Grand Forks

Other financial institutions
hurried to catch up and match the offer, as BND worked with the Department of
Education, the Federal Housing Administration, the Veterans Administration, and
other federal and state agencies to provide student and home loan relief to
flood victims. Due to quick recovery efforts, Grand Forks
lost only 3% of its population during recovery while similarly devastated East
Grand Forks, across the river in Minnesota,
a state without a public bank, lost 17%.

That’s what is possible with a
public bank: people come first. But it’s not all altruism. As a local financial
institution, The Bank of North Dakota’s future was partly tied to a healthy

I wish New
York and New Jersey
speedy recoveries. If you live there, I encourage you to start or get behind a
public bank initiative to shore up local resilience. Twenty states, including New York, have
initiatives underway to create public banks. The Public Banking Institute has a
guide to local initiatives here.

In the mean time, here’s ten ways you can help the recovery effort.

Image by DVIDSHUB of a much smaller flood in Minot in June 2011, licensed under Creative Commons. The Bank of North Dakota was similarly involved in relief efforts in Minot, including providing low-interest loans for residents and businesses affected by the flood.   

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