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How the Public Bank of North Dakota saved
Grand Forks

November 03, 2012

Aerial view of Great Red River Flood 1997 looking toward downtown of Grand Forks, North Dakota which was evacuated after a levee topped. The deluge was the worst flood for the area since 1826. CLICK TO ENLARGE
By Jim Morrow & Ira Dember

(GRAND FORKS, N.D.) -- As the nation watches the aftermath of the destructive Hurricane Sandy in New York and New Jersey, it may be instructive to compare another cleanup 15 years ago in North Dakota after another natural disaster – the massive flooding of the Red River and the fire in downtown Grand Forks.

Folks in Grand Forks, North Dakota will never forget April 1997, when record flooding of the Red River and major fires devastated the city.

They also won't forget that it was Bank of North Dakota -- the nation's only bank owned by a state -- that put people above profits.

The BND rushed to the rescue with financial flexibility and generosity of spirit in the public interest that no privately owned bank could match.

For Grand Forks, sunshine was part of the problem. Most years, the region's winter snows melt gradually over a span of months.

But by mid-March, temperatures had hovered below 40 degrees for four months straight. Ten feet of undiminished accumulated snow pack loomed in the Red River watershed.

Beginning March 18th, temperatures suddenly warmed above freezing and remained high for 27 days straight. Runoff from snowmelt swelled the Red River and its tributaries into torrents.

The National Weather Service predicted the river would crest at 49 feet, equal to the area's highest previous flood level in modern history. Sandbag dikes, built to handle a flood at that level, protected the town -- until they didn't.

On April 16 the Red River surged to 49 feet and, in subsequent days, kept rising: 50, 52, 54 feet. On April 18, floodwaters breached a dike, then others.

All hell broke loose.

Largest evacuation since 1826

Mayor Pat Owens ordered 50,000 people to evacuate -- at the time the largest US evacuation since Sherman's burning of Atlanta, 133 years earlier.

But Grand Forks' troubles had only begun. In a turn of events that would make Murphy blush, floodwaters shorted electrical equipment in a downtown building.

National news media carried dramatic pictures of firefighters struggling to fight blazes in buildings surrounded by water. Fire spread to apartments where 40 stalwarts had defied Mayor Owens' evacuation order.

Emergency workers had to rescue them from both fire and flood before firefighting began. The inferno consumed 11 buildings, 60 apartments, and the Grand Forks Herald, with its 120-year archive.

The Toll

Incredibly, not a single person in Grand Forks died as a result of these twin disasters. But the town and its sister city, East Grand Forks on the Minnesota side of the river, lay in ruins.

Floodwaters covered virtually the entire city and took weeks to fully recede. Property losses topped $3.5 billion.

The flood inundated 16 of 22 local schools, 315 businesses and a staggering 75% of area homes.

In all more than 5,000 businesses were affected by an earlier blizzard plus the flood and fire. Some businesses sustained only minor damage; others were totally destroyed.

Enter BND - North Dakota's Public Bank

Soon after floodwaters swept through Grand Forks, the state-owned Bank of North Dakota began taking unprecedented action to help families and businesses recover.

Led by BND's then-president and CEO John Hoeven -- future North Dakota governor and US senator -- the bank quickly established nearly $70 million in credit lines.

ˇ $15 million for the ND Division of Emergency Management

ˇ $10 million for the ND National Guard

ˇ $25 million for the City of Grand Forks

ˇ $12 million for the University of North Dakota, located in Grand Forks

ˇ $7 million allocated to raise the height of a dike at Devil's Lake, about 90 miles west of Grand Forks

BND also launched a Grand Forks disaster relief loan program and allocated $5 million to help other areas affected by the spring floods.

With BND leading the way, local financial institutions matched these funds, making available more than $70 million altogether.

BND led the way in getting people back on their feet

Flooding swept away many jobs, leaving families without a livelihood. BND coordinated with the US Department of Education to ensure forbearance on student loans.

The bank also worked closely with the Federal Housing Administration and Veterans Administration to gain forbearance on federally backed home loans and to establish a center where people could apply for federal/state housing assistance.

Further, BND worked with the North Dakota Community Foundation to coordinate a disaster relief fund, and the bank served as the fund's deposit base.

BND didn't stop there. Agriculture has long been a North Dakota economic mainstay. In the Great Depression, BND helped keep families on their farms.

With the record 1997 spring floods, many farm families again faced financial ruin. BND responded by reducing interest rates on existing Family Farm and Farm Operating programs.

Families used these low-interest loans to restructure debt and cover operating losses caused by wet conditions in their fields.

To help finance the disaster recovery, BND obtained funds at reduced rates from the Federal Home Loan Bank, in turn enabling the publicly-owned bank to pass along cost savings to flood-affected borrowers in the form of lower interest rates.

Some impacts can be readily measured; others may be deduced.

Between the 1997 floods and 2000, Grand Forks lost 3% of its population. Sister city East Grand Forks, right across the river in Minnesota, lost 17% of its population in the same period.


Or did Grand Forks -- one minute away by car -- achieve a more rapid, more graceful economic recovery, in part because of what North Dakota's unique, publicly-owned bank accomplished there?

Likely, one could also compare the results of BND's efforts to what happened in New Orleans, after hurricane Katrina, and end up with the same answers.

Conclusion: Unparalleled Advantage

In 1997 the people, businesses and institutions of Grand Forks, North Dakota experienced firsthand the unparalleled ability of a publicly-owned bank to place the public interest above all other considerations.

Because BND has no shareholders other than the State of North Dakota, it has far-reaching flexibility and, in emergencies like the 1997 flood, can act quickly to catalyze and coordinate resources ranging from federal agencies to local community banks.

No other institution in the wake of 1997's overwhelming disaster combined the credibility, clout, capital, and connections to protect the public interest as BND did for North Dakota families and small businesses.

The same holds true today. People and businesses across America are drowning in unsustainable debt. They face a flood of foreclosures, many with home values that are "underwater."

Meanwhile conventional banks keep credit tight, drying up the very resource that businesses need to hire more people and get the economy moving again.

If each state had its own public banking institution, today's drastic situation might be very different.

Just ask anyone in Grand Forks who lived through 1997.


Jim Morrow & Ira Dember are volunteers with the Public Banking Institute. This article in a slightly different form was originally published at the PBI website here

Editor’s note: There has long been a move afoot to create a public bank in Washington State. Last month in Olympia, Washington State Treasurer Jim McIntire told a coalition of citizens and labor groups that want to start a state owned bank that - despite the now known and proven risky behavior of the “too big to fail” commercial banks that played arguably the key role in creating the Great Recession of 2007-2008 – he would not help citizens create a public bank in Washington because of the “risk” involved.

More on that story here



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