Why Is Socialism Doing So Darn Well in Deep-Red North Dakota?

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We’re a fairly conservative lot up here in the upper Midwest and we didn’t do any subprime lending and we have the ability to get into the derivatives markets and put on swaps and callers and caps and credit default swaps and just chose not to do it, really chose a Warren Buffett mentality—if we don’t understand it, we’re not going to jump into it. And so we’ve avoided all those pitfalls.

As state government employees, BND executives have no incentive to gamble their way toward enormous pay packages. As you can see, the top six BND officers earn a good living, but on Wall Street, cooks and chauffeurs earn more.

• Eric Hardmeyer, President and CEO: $232,500
• Bob Humann, Chief Lending Officer: $135,133
• Tim Porter, Chief Administrative Officer: $122,533
• Joe Herslip, Chief Business Officer: $105,000
• Lori Leingang, Chief Administrative Officer: $105,000
• Wally Erhardt, Director of Student Loans of North Dakota: $91,725

The very existence of a successful BND undermines Wall Street's claim that in order to attract the best talent big banks need to offer enormous pay packages. Yet somehow, North Dakota is able to find the talent to run one of the soundest banks in the country? The BND is living proof that Wall Street's rationale for sky-high executive pay is a self-serving fabrication. (For more information on financial inequality please see my latest book, How to Earn a Million Dollars an Hour , Wiley, 2013.)

Wall Street Is Gunning for Bank of North Dakota

As you can well imagine, our financial elites would love to see this successful (socialist!) bank disappear. Its salary structure and local investments makes a mockery of Wall Street's casino banking system. But the bigger threat comes from the possible spread of this public banking concept to other states. Already, there are 20 or so state legislatures that are exploring state banks. Collectively, more public banks would pose an enormous threat to the $1 trillion in state and local bank deposits that now run through Wall Street.

But elite financiers also stand to lose much more. In the 49 states without a public bank, there's no safe place to turn for loans to rebuild schools and finance other public infrastructure projects. That creates an enormous opportunity for Wall Street firms to hook localities on expensive bond programs -- like capital appreciation bonds, which can lead to repayments equaling 10 times the original loan. Investment bankers and advisers also make enormous fees by selling expensive, high-risk financial schemes to state and local governments ( read an investigative report here). But such schemes are useless in North Dakota where the state bank provides the capital the state needs for a fraction of the long-term costs.

Trade Agreements: Wall Street's Weapon of Mass Destruction

Clearly, from Wall Street's perspective, the North Dakota bank must go, and all other state efforts to replicate it must be thwarted. Wall Street's stealth weapon may be lodged within the latest corporate trade agreement called the Trans-Pacific Partnership (TPP), which currently is being negotiated in secret. We already know that Wall Street is seeking to remove all tariff restrictions that prevent the U.S. financial services industry from doing business in countries like Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The biggest banks also want the treaty to eliminate "non-tariff" barriers including regulations that create "unfair" competition with state-owned financial enterprises.

Depending on the final language, it is possible that the activities of the Bank of North Dakota could be ruled illegal because "foreign bankers could claim the BND stops them from lending to commercial banks throughout the state," according to an analysis by Sam Knight in Truthout. How perfect for Wall Street: a foreign bank can be used as a shill to knock out the BND.