Senator's bill to study state-run bank considered long shot

deroberts@charlotteobserver.comMarch 19, 2013 


Ellie Kinnaird

In a state that’s a hub for banking, an N.C. senator is sponsoring a bill that even she admits has little chance of passage.

Her measure calls for a study of a potential state-owned bank.

Eleanor Kinnaird, a Chapel Hill Democrat who says she has “very little love for this industry,” is the primary – and so far only – sponsor for Senate Bill 150, which calls for the creation of a commission to study the impact of a state-owned bank that would receive deposits of state funds.

If Kinnaird is successful, North Carolina would become the second state to have a state-owned bank. The only state with one is North Dakota.

Kinnaird’s bill doesn’t call for the creation of a state-run bank – only a study on the issue – but if such a bank were created, public dollars that state agencies now deposit in privately run banks would be deposited into the state-run bank.

Kinnaird, who’s 81 and serving her ninth Senate term, sees a state-run bank as a buffer from “bad banks” that contributed to the collapse of the economy.

A state-run bank, she said, would be set up “not to make bad loans.”

“A lot of people say, ‘Why should we be captive to the banks who are not acting in the best interest of our people?’ ” she said. “I think the banking industry has not served the common good.”

The North Carolina Investment Trust, as the bill says the bank would be called, could be a competitor to financial institutions that are already being used to deposit state money. The bill says one of the commission’s tasks would be to study the “extent to which the trust should be allowed to compete with retail-banking establishments operating in North Carolina.”

Motivated by what she calls “very bad behavior” of those in the banking industry who “brought down the economy,” Kinnaird said her wish is that, if nothing else, the bill will start a statewide discussion about the possibility of a state-run bank.

But Kinnaird, who introduced similar legislation last year, has already acknowledged the long odds. She said a state-run bank is simply “not a possibility here” in North Carolina.

Likewise, some in the industry don’t expect the bill to gain much traction.

“I can’t imagine it ever becoming law,” said Harry Davis, economist for the North Carolina Bankers Association, headquartered in Raleigh.

“I can’t imagine the state needs another bank that the private sector couldn’t provide us with.”

But that doesn’t mean North Carolina’s banking industry isn’t paying attention to the bill.

Nathan Batts, senior vice president and counsel for the bankers association, said a state-run bank would compete against privately run banks. A state-run bank would also create “an expansion of state government when we are trying to create efficiencies in North Carolina,” he said.

Kinnaird, who represents Senate District 23, which is composed of Chatham and Orange counties, said she wants to emulate the success of Bank of North Dakota. That bank, she said, has stabilized that state’s economy “and led to a flourishing, thriving citizenry.”

The North Dakota legislature created the Bank of North Dakota in 1919 to help the state’s agriculture industry as farmers faced rising interest rates, according to the bank’s website.

Rick Clayburgh, president and CEO of the North Dakota Bankers Association, said the Bank of North Dakota “has a great reputation, and it’s well respected by the private-sector banks in North Dakota.”

State agencies must deposit their funds with the bank, he said, adding that the bank also provides services to privately run banks and offers checking and savings accounts to North Dakotans. But, he said, there are no branches across the state – just the one headquarters building in the state capital, Bismarck – and no online banking service.

“It might not work in another state,” he said. “If we did not have a state-owned bank today … I don’t know if our legislature would do it. It just happened to come along at the right time.”

The N.C. bill has been referred to the Senate’s Committee on Rules and Operations, awaiting assignment to a committee to start to consider the legislation. Observers say study bills are sometimes rolled up in larger study bills toward the end of the legislative session.

With banks wielding a lot of influence in North Carolina, Kinnaird isn’t expecting much.

“I’m David and they’re Goliath,” she said.

Roberts: 704-358-5248; Twitter: @DeonERoberts

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