The next great crisis in rural life in North Dakota occurred between 1928-1940: the Great Depression coupled with the Dust Bowl, which has been called the greatest manmade environmental disaster in American history.
The Bank of North Dakota played an important role in those desperate years, but this crisis, which extended far beyond the boundaries of North Dakota, brought the federal government into the equation for the first time.
The New Deal and its legacy institutions made the US government rather than the Bank of North Dakota, the primary supplier of rural credit on the Great Plains. In a sense the USDA appropriated many of the programs of the Bank of North Dakota. Imitation is the greatest form of flattery!
During the darkest years of North Dakota history, under the leadership of Governor William L. Langer and the management of his friend Frank Vogel, the Bank of North Dakota did everything it could to keep the state afloat. Local governments, including school districts, often issued warrants against future tax collections as pay for employees. These were essentially post-dated checks. The Bank of North Dakota redeemed these warrants at face value while private banks routinely discounted them, usually by 15 percent.
During the desperate years of the Dust Bowl and Great Depression, Governor Langer and Frank Vogel determined that the Bank of North Dakota would foreclose only on:
- completely abandoned land;
- lands controlled by court officials or heirs of property of mortgaged land that they were not occupying;
- lands not occupied or operated personally by bona fide farmers;
- lands where the mortgagee agreed to the foreclosure in order to clear title.
The “Wild” Bill Langer influence
William L. Langer took an immediate interest in the Bank of North Dakota when he took office as Governor in 1933. He removed the manager, C.F. Mudgett, and replaced him with assistant manager P.H. Butler. Within weeks, Governor Langer had dismissed fully a third of Bank employees. This brought controversy, including on the three-member Industrial Commission, but Langer prevailed.
One Bank employee recalled, “I’ll never forget that day. It must have been 10 or 15 at least walked out of the Bank that morning and didn’t come back. And here comes this crowd of people looking for desks and of course they seated all of them. There weren’t very many that stayed. Some of them stayed a month or two. Some of them stayed till the next payday. Politics blew up in here in North Dakota.”
Governor Langer knew that it would be wrong-headed to forbid all foreclosures on bankrupt farms. Not even a state-owned bank could survive if it protected every debtor in a time of national economic crisis. Many farmers were bankrupt through no fault of their own. Some, however, were bankrupt because they were poor farmers or inept at managing their finances.
Langer and his hand-picked Bank manager Frank Vogel determined to permit foreclosures only on abandoned farms, on lands not occupied by bona fide farmers, on mortgages held by institutions or family members who had no interest in farming, and in situations where the Bank would be doing the lender a service by clearing title.
Langer’s purpose was to save as many authentic family farms as possible, through patience and trust, hope and a fundamental optimism about the integrity of the suffering people of North Dakota.
It is impossible to determine just how many family farms the Bank of North Dakota saved under the humane leadership of Governor William Langer. It was many thousands.
Langer’s farm mortgage policies vindicated the purpose of a state-owned bank and the vision of its idealistic founders formulated in the heady years of the Nonpartisan League’s ascendency. The Bank of North Dakota was dedicated to the welfare of the people of North Dakota, and to the greater social and economic stability of North Dakota. Its mission was social stability not merely profitability. It had the luxury that most commercial banks did not share of being able to let social stability take precedence over the bottom line. The Bank of North Dakota existed not to make money but to serve the people of North Dakota.
At no point in its long history did the Bank perform its mission with more compassion, generosity of spirit, or awareness of its historically unique charter. Some of this was the Bank, much of it Bill Langer. Langer, a conservative but compassionate populist, responded to the greatest crisis in North Dakota history by using every existing state institution—plus a handful of extra-constitutional executive orders—to save North Dakota from collapse and from a general exodus.
The right institution was in the hands of the right leader at the right time.
Langer was no saint. Charges of bribes, extortion, cronyism, and corruption followed him throughout his career. In 1941, the United States Senate was forced to investigate him when it received petitions from North Dakotans arguing that he was unfit for office. The Senate investigation produced 4,000 pages of testimony, much it lurid, and the pertinent Senate committee voted 15:3 not to seat him. Nevertheless, the full Senate voted 52:30 to permit him to take his seat.
One of the charges against Langer was that he had circumvented Bank procedures to permit an outside company, V.W. Brewer of Des Moines, Iowa, to purchase delinquent commercial bank bonds in North Dakota at a discount and then sell them at par to the Bank. If the Bank had done this work itself, it could have saved at least $250,000 in commissions and fees, some said more then $300,000. Still worse, a partner in the Iowa bond firm purchased some Langer family land in North Dakota for $56,800, when even Langer himself admitted under oath that the land was worth less than half that amount. This was the only serious accusation made of Langer’s handling of the Bank of North Dakota. In the end, the scandal hurt Langer more than the Bank.
750,000 mineral acres owned by the state from foreclosed farmland.
During the Great Depression, the Bank was required to foreclose on farmland, even though they allowed most families to stay on the farm. In 1939, the North Dakota Legislature passed a law reserving 5% of the mineral rights on any land the Bank sold. This was increased to 50% in 1941.
An attempt to raise the reserve rate to 100% was struck down by the Supreme Court of North Dakota in 1951. Attempts in the Legislature to permit landowners to purchase their mineral rights from the state have failed. Eventually, 750,000 mineral acres came into state possession. These minerals are held in trust for all of the people of North Dakota. Given the three oil booms in modern North Dakota history, the Bank’s reservation of these mineral rights has proved to be a boon to the state.
For Sale: 6,360 farms
As the Depression began to yield to better times, the Bank of North Dakota attempted to sell back foreclosed farms to their previous owners, even when others were prepared to pay more for the land. As the economy improved, and in conservative reaction to the “New Deal” policies of the Bank during the Depression, the Bank began to sell land to the highest bidder, irrespective of who it was or who had been the previous owner of the acreage. Ironically, this new policy was an indication of a significantly improved North Dakota economy.
In October 1943, the Industrial Commission voted to make state-held lands available to members of the Armed Forces. At a special session of the Legislature in March, 1944, Governor John Moses suggested that these “surplus” lands be made available to veterans on a preferential basis. Although the program was primarily intended to honor returning veterans, these sales to veterans helped the Bank clear its inventory of foreclosed lands. At the beginning of the 1940s, the Bank had 6,360 farms for sale. In 1944, the number had been reduced to 2,554. By 1947, the Bank held only 735 farms. And by 1950, there were only 63 farms left on the Bank’s books. The state’s intention to privatize its holdings had succeeded.