From North Dakota to Scotland: Exploring the Public Bank Option

The Royal Bank of Scotland (RBS) and the Bank of Scotland have been pillars of Scotland’s economy and culture for over three centuries.  So when the RBS was nationalized by the London-based UK government following the 2008 banking crisis, and the Bank of Scotland was acquired by the London-based Lloyds Bank, it came as a shock to the Scots.  They no longer owned their oldest and most venerable banks.

Another surprise turn of events was the triumph of the Scottish National Party (SNP) in the 2011 Scottish parliamentary election.  Scotland is still part of the United Kingdom, but it has had its own parliament since 1999, similar to U.S. states.  The SNP has rallied around the call for independence from the UK since its founding in 1934, but it was a minority party until the 2011 victory, which gave it an overall majority in the Scottish Parliament.

Scottish independence is now on the table.  A bill has been introduced to the Scottish Parliament with the intention of holding a referendum on the issue in 2014.

Arguments in favor of independence include that it will allow the Scottish people to make decisions for Scotland themselves, on such contentious issues as having nuclear weapons in their seas and being part of NATO.  They can also directly access the profits from the North Sea oil off Scotland’s coast.

Arguments against independence include that Scotland’s levels of public spending (which are higher than in the rest of the UK) would be difficult to sustain without raising taxes.  North Sea oil revenues will eventually decline.

One way budgetary problems might be relieved would be for Scotland to have its own publicly-owned bank, one that served the interests of the Scottish people.  True economic sovereignty means having control over the national currency, credit and debt.

The Public Bank Option

It was in that context that I was asked to give a presentation on public banking at RSA Scotland (the Royal Society of Arts) in Edinburgh on November 22nd.  Among other attendees were a special adviser and a civil servant from the Scottish government.  The presentation was followed by one by public sector consultant Ralph Leishman, Director 4-consulting, who made the public bank option concrete with specific proposals fitting the Scottish context.  He suggested that the Scottish Investment Bank (SIB) be licensed as a depository bank, on the model of the state-owned Bank of North Dakota.  Lively debate followed.

The SIB is a division of Scottish Enterprise (SE), a government economic development body.  SE encourages economic development, enterprise, innovation and investment in business, which is achieved by the SIB through the Scottish Loan Fund.  As noted in a September 2011 government report titled “Government Economic Strategy”:

“[S]ecuring affordable finance remains a considerable challenge . . . . Evidence shows that while many large companies have significant cash holdings or can access capital markets directly, for most Small and Medium-sized companies bank lending remains the key source of finance. Unblocking this is key to helping the recovery gain traction.”

The limitation of a public loan fund is that the money can be lent only to one borrower at a time.  Invested as capital in a bank, on the other hand, public funds can be leveraged into nearly ten times that sum in loans.  Liquidity to cover the loans is provided by deposits, which remain in the bank available to the depositors.  Any shortage in liquidity can be covered by borrowing at low interest from other banks or the money market.  As observed by Kurt Von Mettenheim, et al., in a 2008 report titled Government Banking: New Perspectives on Sustainable Development and Social Inclusion from Europe and South America (at page 196):

“[I]n terms of public policy, government banks can do more for less: Almost ten times more if one compares cash used as capital reserves by banks to other policies that require budgetary outflows.”

Leishman stated that the SIB now has investment funds of £23.2 million from the Scottish government.  Rounding this to £25 million, a public depository bank could have sufficient capital to back £250 million in loans.  For deposits to cover the loans, the Scottish Government has £125 million on deposit with private banks, currently earning little or no interest.  Adding just 14% of the General Fund cash and cash equivalent reserves held by Scotland’s local governments would provide another £125 million, reaching the needed £250 million with six times that sum in local government revenues to spare.

The Model of the Bank of North Dakota

My assignment was to show what the government could do with its own bnak, following the model of the Bank of North Dakota (BND).  On the Saturday following the RSA event, the Scotsman published an article by Alf Young that summarized the issues and possibilities so well that I’m taking the liberty of abstracting from it here.

North Dakota is currently the only U.S. state to own its own depository bank.  The BND was founded in 1919 by Norwegian and other immigrants, determined, through their Non-Partisan League, to stop rapacious Wall Street money men foreclosing on their farms.

All state revenues must be deposited with the BND by law.  The bank pays no bonuses, fees or commissions; does no advertising; and maintains no branches beyond the main office in Bismarck. The bank offers cheap credit lines to state and local government agencies. There are low-interest loans for designated project finance. The BND underwrites municipal bonds, funds disaster relief and supports student loans. It partners with local commercial banks to increase lending across the state and pays competitive interest rates on state deposits. For the past ten years, it has been paying a dividend to the state, with a quite small population of about 680,000, of some $30 million (£18.7 million) a year.

Young writes:

Intriguingly, North Dakota has not suffered the way much of the rest of the US – indeed much of the western industrialised world – has, from the banking crash and credit crunch of 2008; the subsequent economic slump; and the sovereign debt crisis that has afflicted so many. With an economy based on farming and oil, it has one of the lowest unemployment rates in the US, a rising population and a state budget surplus that is expected to hit $1.6bn by next July. By then North Dakota’s legacy fund is forecast to have swollen to around $1.2bn.

With that kind of resilience, it’s little wonder that twenty American states, some of them close to bankruptcy, are at various stages of legislating to form their own state-owned banks on the North Dakota model. There’s a long-standing tradition of such institutions elsewhere too. Australia had a publicly-owned bank offering credit for infrastructure as early as 1912. New Zealand had one operating in the housing field in the 1930s. Up until 1974, the federal government in Canada borrowed from the Bank of Canada, effectively interest-free.

. . . From our western perspective, we tend to forget that, globally, around 40 per cent of banks are already publicly owned, many of them concentrated in the BRIC economies, Brazil, Russia, India and China.

Banking is not just a market good or service.  It is a vital part of societal infrastructure, which properly belongs in the public sector.  By taking banking back, local governments could regain control of that very large slice (up to 40 per cent) of every public budget that currently goes to interest charged to finance investment programs through the private sector.

Recent academic studies by von Mettenheim et al. and Andrianova et al. show that countries with high degrees of government ownership of banking have grown much faster in the last decade than countries where banking is historically concentrated in the private sector.  Government banks are also LESS corrupt and, surprisingly, have been MORE profitable in recent years than private banks.

Young writes:

Given the massive price we have all paid for our debt-fuelled crash, surely there is scope for a more fundamental re-think about what we really want from our banks and what structures of ownership are best suited to deliver on those aspirations? . . .

As we left Thursday’s seminar, I asked another member of the audience, someone with more than thirty years’ experience as a corporate financier, whether the concept of a publicly-owned bank has any chance of getting off the ground here. “I’ve no doubt it will happen,” came the surprise response. “When I look at the way our collective addiction to debt has ballooned in my lifetime, I’d even say it’s inevitable”.

The Scots are full of surprises, and independence is in their blood.  Recall the heroic battles of William Wallace and Robert the Bruce memorialized by Hollywood in the Academy Award winning movie Braveheart.  Perhaps the Scots will blaze a trail for economic sovereignty in the  E.U., just as North Dakotans did in the U.S.  A publicly-owned bank could help Scotland take control of its own economic destiny, by avoiding unnecessary debt to a private banking system that has become a burden to the economy rather than a pillar in its support.


Ellen Brown is an attorney and president of the Public Banking Institute.  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are,, and

28 Responses

  1. ” Scottish independence is now on the table. A bill has been introduced to the Scottish Parliament with the intention of holding a referendum on the issue in 2014 ” Why do \we not have “national public referendum” like Iceland and now perhaps Scotland ?…lack of dedicated leaders I would suppose at a minimum.

  2. Thank God you were here, Ellen, and on such a significant date… I’ve lived in Scotland for more than thirty years (originally from California) and the debate on a public bank for a possibly independent Scotland is THE topic that needs to be examined here.

    Apparently the SNP (Scottish National Party) are planning on having ‘independence’ but retaining the UK Pound, and the B of E – a recipe for debt – and genuine – slavery if ever I heard one.

    I hope you enjoyed your time here, and I’m really sorry I missed your appearance. Thank you for your invaluable work ! ! !

  3. Aye, a public bank it will be for the Scots!

    • Frank. By the sound of your accent, you are Scottish.
      If, as it seems, Scotland gains her independence, I urge you NOT to adopt the Euro as your currency. Just look at Europe today. Each country has lost it’s financial sovereignty, and the Bankers (and the ESM) are calling the shots, (and the “European Parliament” must be the greatest waste of time and money in mankinds history, which begs the question……… “what have they ever done for us?”). Best wishes to Scotland and its people.

      • Sovereignty of currency, that is, one created without debt, just entering circulation from the government issueing it, is all powerful and absolutely necessary for any prosperous and independent country . That’s why we had our original revolution; the Brits wouldn’t allow Ben Franklin’s colonial scrip, a sovereign currency ! We also got through the war with another, the continental, which the Brits DID manage to coutnerfeit, driving it out eventually, but today, that would hopefully not be possible Just make sure you all honor the work ethic that built western civilization and let bankers live off only interest and fees similar to the rest of commercial enterprise, not actually create money from thin air, in effect counterfeting it…the only entity that can rightly do “that” is the government, and then only under the strictest scutiny from all citizens who can vote them out if they mess up and overprint, etc. America needs to learn that lession, well spelled out in our own Constitution, but you’d never know it talking with most…art. 1, sec.8, par. 6 ( not 5 on coining, with the old Spooner problem)

  4. “And then she went and spoiled it all by saying something stupid …”! I thought this was a good article and then I got down to the bit that perhaps “the Scots will blaze a trail for economic sovereignty in the E.U.”. Then I realised that the whole thing was just another part of the “smash the EU at all costs” scam, of which Ms Brown is a major practitioner. Does she really think public banking is right for Scotland or is she just cynically using Scotland as an instrument to attack the EU?

    • Of course she thinks public banking is right for Scotland. The article is not ‘just another part of the “smash the EU at all costs’ scam”. Check out her specific criticisms of the way the EU monetary system is set up and the ESM scam in her many articles.

    • Public banking is one of THE ways we will break away from the federal reserve, as the bank of north dakota did so long ago…or did you miss that too ? Ellen speaks to that idea alone; the Scots and Brits make of it what they will. The idea stands high on it’s own merit.

    • Public banking is right for any country that values its political and economic sovereignty.

      The EU and private centralized banking are for those that enjoy perpetual debt slavery to the .01%.

      If this isn’t obvious to a european by now, then it never will be.

      Anyhow, It’s your choice.

  5. […] Ellen Brown Featured Writer Dandelion Salad December 8, […]

  6. On becoming independent Scotland would automatically exit the 27-state European Union (EU). Scotland could apply to rejoin, but it is (in theory) now obligatory for new members to move towards joining the Eurozone, which would mean an end to any financial independence and leave Scotland even worse off than in the UK. Actually joining the Eurozone could probably be delayed, as is the case currently with the Czech Republic. However the EU has assumed the right to dictate financial policy to non-Eurozone EU members such as Hungary and Romania, and has taken steps to prevent some of these countries exercising control over their own central banks. In these circumstances, a better option for a newly independent Scotland might be to follow the example of Norway and stay outside the union altogether.

  7. Further to my comment just above, it goes almost without saying that simultaneously with leaving the UK Scotland would need to establish its own currency . This new currency would float against other currencies, and might well initially lose value against the sterling pound. This need not be catastrophic. A good modern analogy which those campaigning for Scottish independence would do well to study is the break-up of Czechoslovakia 20 years ago. Due to careful planning and efficient organisation this was achieved without disruption; the new Slovak currency initially dipped about 20% in value as compared with the new Czech currency, but things soon stabilised.

    • I don’t think the transition will be as difficult as you imagine. Unlike the Czech and Slovak currencies, the Scotish sovereign currency will be free of compound interest to private banks and it will not float against other currencies. The worth Scotish debt free money will be instead tied directly to the demand of domestic labor, goods and services. It will be a pure medium of exchange for Scotish wealth that stays in Scotland — specifically in the accounts of the people that created it via their labors.

      Floating world reserve currencies have always had an terrible demise. Banks and hedge funds ruthlessly short them out of existence and saddle their govt with insufferable debt. Mexico in 1994 a good example of what awaits those that would have a world reserve floating currency. Czech republic survived probably because their economic fate was absorbed and diffused by their membership in the EU.

      • Contrarian – I see your point re currency speculators. However the Scandinavian countries seem to manage well enough keeping their own currencies above water. What’s their secret? A strong, export-led real economy must help. But is Scotland’s economy up to it? Perhaps (as I think you are suggesting) it will have to consider exchange controls. Which could work, although ordinray people might not like the inconvenience of having to declare how much money they are bringing in or out of the country every time they cross the border.

  8. […] Ellen Brown Web of Debt […]

  9. Keep up the good work, Ellen. You WILL change the world.

  10. The Euro is the 9th circle of banking hell……..

    If the Scots go down this road…………

  11. I hope that the people of Scotland seriously consider Ellen Brown’s suggestion to create public banks in Scotland. It would be the greatest way to stay independent, and for the Scottish people to own their banks. If you have spending problems, or face tax increases, look at how the Bank of North Dakota functions, and the many advantages public banking offers, and avoid getting sucked into the private banking vortex which is the EU.

    Besides this excellent article, there is a great video on YouTube describing the Bank of North Dakota:

    All the very best to the people of Scotland.

    • Public Banking IS one of the best ways to steer clear of abusive bankers as the Bank of North Dakota illustrates, and has for about 90 years, but the other even more important way is to have sovereign money issued by the government, not private banks. I envision a system somewhat like others that would have a sovereign government, issue sovereign, no-debt currency, ie. printed/generated from “thin-air” as does our federal reserve private banking system, which is clearly counterfeiting via the Constitution, art. 1, sec. 8, par. 6, but has “somehow” gone unrescinded for 100 years, even though congress has always had the power to do so ! Our Ben Franklin and Abe Lincoln used this type of money (colonial scrip) creation to cause prosperity in the colonies, then that caused the revolution as the Brits wouldn’t hear of such a thing as not being the all powerful issuers during which Ben again printed sovereign money for the colonies and it (the continental) got us thorugh that til the Brits figured how to counterfeit it well enough. Money planely must be created debt free for a prosperous nation, ie. no national debt incurred in it’s printing as our system does with the fed as “lender of last resort”, as we shall soon see in the fake fights over the “cliff”…an excuse to print more debt money, raise the “debt limit” of counterfeiting, which is not at all Constitutional or necessary and cause even the Interest on same to be unpayable such that now they will do away with all social programs, even the paid for ones, like social security ! The mean to “debt” us into serfdom as they plunder the world with our young, who are unable to get jobs anywhere else but in their ISAF equivalent forces, now taking over the final few countries in the oil rich ME, etc., as our middle class becomes almost non-exstant due to their actions. The National Debt, has been malfeasantly transformed into a debt-transfer vehicle of the rich to the poor…to wage their wars of conquest…til somebody there wises up….OH !…Petraeus and Spitzer did…but you see what happened to them !

      • What a great post. You have nailed it, and expressed our dire situation so well.
        Yes, I believe that the “National Debt” is an artifice of the 1%. They are such masters of deception, with their expensive think tanks – these talking heads (mind frackers) of the 1%. How cleverly and artfully they have transformed the meaning of “entitlements” tirelessly and steadily repeating their memes over and over again, drumming them into the minds of the people so that they will be in a state of perpetual confusion and weakness.
        The greedy part of the 1% do feel that they are “entitled” to whatever they want simply by virtue of their wealth, and it is they who want everyone to believe that the 99% are not “entitled” to their hard earned money which was taken out of our paychecks to pay for such things as social security – which is NOT an entitlement, and does not contribute to our “National Debt.” These greedy Midases are not going to stop trying to destroy the social safety nets, and we always have to be on guard 24/7 if we want to keep them.
        The intentional redefinition through repeated usage of words like “patriot”, “family” “homeland”, “country”, “right to work,” “national debt”, “fiscal cliff” etc. and in this case “entitlements” has a sort of Pavlov effect causing many to react in a frightened, blinded, and visceral way so that they spend a great deal of their time following the illogical arguments of the 1% and their minions (Fox) and believing them to their own detriment. The corporate media seems to help support all these bogus memes, and intentionally, by all appearances, wants to prevent people from using their brains.
        I think Spitzer is now doing a great job as a journalist on Current, and one of the few in the media who is trying to make up for what he did or did not do in the past. But that’s my opinion.

        • Calliope, Good post! It’s fascinating watching how Americans have this “Patriotism” drummed into them all the time. No other country on Earth does it. But, it seems to only be the 99% that it is aimed at. The 1% like to be free to do whatever they want, like making lots of money with no restrictions on how it is accumulated, like avoiding military service, like avoiding tax, and somehow, seemingly able to avoid prison by commiting crimes that anyone would be “banged up” for.

          As I recall Spitzer became famous for pointing out what was happening in the Banking system, and on Wall st generally(correct me if I’m wrong). And soon thereafter he was “gotten rid of” for having sex with prostitutes. Clinton was subjected to the same hypocrisy, but Slick Willy survived(although Hilary probably hit him with a rolling pin, kitchen sink, and anything else within reach at the time”)

          So, American people, work very hard, obey the rules, pay your taxes,enrol your children when required, don’t have consensual sex with anyone, and salute the flag, while the “smart guys” take the money and run.

  12. In response to the outstanding comments posted by Calliope, Brian Harry and Tom LaMar, I was reminded of some amazingly prophetic statements made by George Carlin in a video posted on YouTube. I think he was spot on.

    • George Carlin is legendary. There’s a lot of G Carlin on You Tube, and he is excellent if you like the truth. Also have a look at Bill Hicks.

  13. There was a comment in the article about Australia having it’s own soveriegn (Commonwealth Bank) bank, not so. It was sold along with Telecom, Qantas most seaports/airports, power stations/distributors, prisons etc etc etc. Oz would be a basket case if not for the mineral boom.
    The currency is high at the moment, but that seems to be hurting all exporters. Not long till we become the next Greece I feel.

    • The businesses mentioned above were owned by the people of Australia, but were sold off in the name of “Globalisation” (a trendy policy at the time, promoted by that mad old cow Margaret Thatcher). These companies were sold off by both sides of politics, who, increasingly, seem to be carbon copies of each other.
      In Australia (as in the USA) these days, government is firmly in the grasp of corporations, and politicians (on both sides) do exactly as they are told. Democracy has become a bad joke.

  14. […] From North Dakota to Scotland: Exploring the Public Bank Option | WEB OF DEBT BLOG. […]

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