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100 Years: The Bank Of North Dakota Story (Part III)

Above photo: Bank president Herb Thorndahl (left) is pictured with Industrial Commission members Ag Commissioner Myron Just, Governor Arthur Link and Attorney General Allen Olson.


Read Part I here and Part II here.


On Thursday, April 5, 1951, the Amerada Petroleum Company of Tulsa, Oklahoma completed a 17-hour test of an oil well on the Clarence Iverson farm near Tioga, North Dakota. The well produced 307 barrels of 44 gravity oil and around 5 million cubic feet of gas. The company described the find as ‘commercial.’

After the Depression, the Bank of North Dakota worked hard to divest itself of the farm lands it had acquired through foreclosure during the crisis of the Depression and Dust Bowl. By 1950, only a few dozen of the 6,360 farms the Bank held title to in 1940 were still in its delinquent portfolio. 

The 1939 Legislature voted to keep 5 percent of the mineral rights on the foreclosed land upon sale and increased it to 50 percent four years later. By keeping this significant percentage of the mineral rights on the lands it had acquired during the desperate years, however, the Bank laid the foundation for decades of more ample revenues during the second half of the 20th Century, when oil became a significant source of North Dakota economic activity.

The Bank held a mineral rights auction for land in Tioga in its lobby August 8, 1951. The rights sold for $28 per acre.

It was an exciting atmosphere in the Bank of North Dakota lobby when mineral rights in Tioga were being auctioned on a hot, summer day.

A Lower Profile

During the 1950s, the national conservative backlash against Franklin D. Roosevelt’s New Deal achieved virulent proportions. This was the era of Joseph McCarthy, the House Un-American Activities Committee, “communist infiltration,” and the real or perceived theft of America’s nuclear secrets. Anything savoring the aroma of socialism or social engineering was suspect during this period of American history. There was a national attempt to dissolve Indian reservations, undo Social Security, and roll back every remaining New Deal program. 

Bizarrely, A.C. Townley, the populist firebrand who had created the Nonpartisan League in 1915 and presided over it during its headiest years, now rebooted himself as a snarling anti-Communist stump speaker. The managers of the Bank of North Dakota wisely kept their heads down, went about their business in the least-controversial manner, and avoided publicity during this period of reaction. Their goal was survival.

By 1959 the Bank had stopped making farm loans. Thus, one of the principal purposes for the Bank’s creation in 1919 had ceased–40 years later–to be one of the Bank’s roles in North Dakota. By then the Federal Farm Program had become the principal guarantor of farm loans in North Dakota. Essentially, the New Deal and its program descendants had taken the place of the Bank in providing economic stability for the nation’s farms. By now the Bank of North Dakota was primarily a depository for public-entity funds in North Dakota. Its modest home loans program was one of the few services available to individual North Dakotans.

The Bank played a large role in the development of Highland Acres located in Bismarck, North Dakota in the early 1950s. (Bismarck Veterans Memorial Public Library (Bismarck: Capital City Memories ) Item No. 1f-114)

The years from 1945 to 1960 were “an exceptionally quiet time for the Bank,” according to Rozanne Enerson Junker, the author of a history of the Bank published in 1989. After the crisis of the Great Depression, exacerbated by the extra-constitutional efforts by Governor William L. Langer to hold the state together through its greatest crisis, the leaders and people of North Dakota “were content to run the Bank primarily as a depository of the state’s funds.” 

Through the first hundred years of the Bank’s existence, a fascinating pattern developed. The Bank raised its profile and took significant risks to help North Dakota through difficult times, then slipped below the radar when conditions improved, both because its job was temporarily done and to avoid calling undo attention to itself. Periods of progressivism tended to alternate with periods of retrenchment and retraction. After periods of intense activity, the Bank tended to embrace the least “exposed” and controversial profile, quietly doing its core work and accumulating capital and credibility, until the next time it was needed to prop up the state.

The Bank’s second transfer of funds to the general fund was made in 1951. In 1953, the Bank supplied $9.6 million to match federal highway funds. This was the first occasion when funds from loan collections were transferred to the state’s general fund, rather than earnings (such as mineral revenues) unrelated to the Bank’s loan portfolio. Thanks to these precedents, during economically difficult times in North Dakota, the Bank was increasingly called upon to make transfers to meet budget shortfalls.

Economic Development

After years, even decades, of quiet service, the Bank of North Dakota was sparked back into active life with the election of William Lewis Guy as North Dakota’s 26th Governor. Addressing the North Dakota Legislature in January 1961, the new young governor declared, “The philosophy of lending of the Bank of North Dakota should reflect our faith in the potential of economic development for our own people.” The Bank should have “more latitude in financing industrial development.”

Under Bill Guy’s leadership (via then Bank president Herb Thorndal), the Bank ceased to buy bonds from political subdivisions. Cautiously, the Bank began to make farm loans again after a 28-year hiatus. The mostly-Republican state Legislature fought this initiative, remembering the chaos of delinquent loans and foreclosures of the 1930s. Nevertheless, in 1961 the Industrial Commission directed the Bank to set aside $500,000 for loans guaranteed by the Farmers Home Administration (FmHA). Over time this enabled the Bank to cover the backlog of loans that the federal FmHA had approved in the state. Governor Guy also wanted to create a loan program for beginning farmers. His program would have guaranteed up to 50 percent of these loans. The Legislature rejected the idea on a party line vote. 

For the most part, Guy’s call for the Bank to help expand the state’s economy were never implemented because he did not have the support from the other two Industrial Commission members who were from the opposing party. It did plant the seed for the Bank’s potential to impact the lives of North Dakotans. 

Tough economic times in the 1980s set the stage for the Bank to embark on its economic development mission. 

Governor George Sinner furthered the previous governor’s vision for the Bank. (State Historical Society of North Dakota 31843-0001-1241)

Governor Sinner took office in 1985 and insisted that the Bank of North Dakota should be engaged in community development. He wanted the Bank to be more than a lending institution. At a difficult time in North Dakota history, the collapse of the late 70s oil boom and a prolonged drought, Sinner wanted the Bank to play a role in the regeneration of rural life. This put him squarely in the tradition of the Bank’s origins and founding mission. 

Bank President Joe Lamb determined to set aside a portion of Bank profits to fund specific community development programs. One of these was called PACE (Partnership in Assisting Community Expansion.) The state of North Dakota appropriated $2.7 million to fund small town investments. The Bank worked with local commercial lenders to keep investment loan interest rates low. The PACE program was popular in North Dakota, and it was regarded as a successful public-private partnership for the Bank. 

Over the years, other PACE programs have been added to stimulate economic development.

Student Loans

Although a modest program of student loans had been created in the 1940s by Langer’s Bank Manager Frank Vogel, the Bank of North Dakota became involved in student loans in a significant way beginning in 1967. 

Bank employee Martin “Buck” Stenehjem managed the program. The Bank made its first direct student loan to Grady Porter, a student at Bismarck Junior College who then completed a bachelor’s degree at Valley City State College. This was the first federally insured student loan in the United States! 

The Bank ran a highly-successful student loan program for federal loans until 2010 when the federal government decided to centralize the program. Today, the Bank administers its own state-sponsored student loan program which started in 1997 and fills gaps for thousands of students when federal funding, grants, scholarships and savings aren’t enough to pay for their education.

College SAVE, the state’s 529 program, is administered by Bank of North Dakota and encourages its citizens to start saving for college early by incentivizing with two match programs: the New Baby Match and the BND Match.

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