In Canada, the trendsetter in public banking is the province of Alberta. Alberta's publicly-owned banking system, called Alberta Treasury Branches or ATB, was initiated during the Great Depression to give the private banks a run for the public's money. . .
From 1929 to 1933, the average annual income in Alberta had fallen from $548 to $212, a staggering 61 percent drop. Interest payments continued to bleed the farmers of cash, and taxes had increased. In 1935, Albertans decided they wanted a change and swept the Alberta Social Credit Party into power. In 1938, the system of Alberta Treasury Branches was set up literally as a branch of the provincial government. The stated goal of the ATB was to "provide the people with alternative facilities for gaining access to their credit resources." Bankers initially scoffed at Alberta's attempts to establish a competing economic system, but Albertans had high hopes and rushed to deposit their meager savings in the Treasury Branches. The government invested in the ATB only once, contributing $200,000 in 1938. That was all that was necessary, as the system was self-funding after that. By 1946, the ATB was turning an annual profit of $65,000. According to a booklet titled "Albertans Investing in Alberta 1938-1998," by 1998 the ATB had remitted $68 million to the provincial government.
In India, public sector banks also operate alongside private sector banks. Privatization has made significant inroads into India's banking system, but fully 80 percent of the country's banks are still government-owned. . .
In China, private-sector banking has also made some inroads; but state-owned banks still predominate. In a June 2009 article titled "The Chinese Puzzle: Why Is China Growing When Other Export Powerhouses Aren't?", Brad Setser noted that nearly all countries relying heavily on exports for growth have experienced major downturns and remain in the doldrums -- except for China. When China's external markets fell off, the government turned its credit machine inward to domestic development. Its state-owned banks engaged in a huge increase in lending, with local governments and state enterprises borrowing on a large scale. The result was to create a real fiscal stimulus that put workers to work and got money circulating again in the economy.
In the United States, the trendsetter in public banking is the state of North Dakota, which has owned its own bank for nearly a century. North Dakota is one of only two states (along with Montana) that are currently not facing budget shortfalls. Ever since 1919, North Dakota's revenues have been deposited in the state-owned Bank of North Dakota. Under the "fractional reserve" lending scheme open to all banks, these deposits are then available for leveraging many times over as loans. Other banks in the state do not see the BND as a threat because it partners with them and backstops them, serving as a sort of central bank for the state. BND's loans are not insured by the Federal Deposit Insurance Corporation but are guaranteed by the state. North Dakota has plenty of money for student loans, makes 1% loans to startup farms, has the lowest unemployment rate in the country, and is generally not feeling the pinch of the credit crisis at all.