More On The Landesbanks

Via Ritholtz, alternet gives some detail on the German state public banks:

One overlooked key to the country's economic dynamism is its strong public banking system, which focuses on serving the public interest rather than on maximizing private profits. After the Second World War, it was the publicly owned Landesbanks that helped family-run provincial companies get a foothold in world markets. As Peter Dorman describes the Landesbanks in a July 2011 blog:

They are publicly owned entities that rest on top of a pyramid of thousands of municipally owned savings banks. If you add in the specialized publicly owned real estate lenders, about half the total assets of the German banking system are in the public sector. (Another substantial chunk is in cooperative savings banks.) They are key tools of German industrial policy, specializing in loans to the Mittelstand, the small-to-medium size businesses that are at the core of that country's export engine. Because of the landesbanken, small firms in Germany have as much access to capital as large firms; there are no economies of scale in finance. This also means that workers in the small business sector earn the same wages as those in big corporations, have the same skills and training, and are just as productive. [Emphasis added.]

The Landesbanks function as "universal banks" operating in all sectors of the financial services market. All are controlled by state governments and operate as central administrators for the municipally owned savings banks, or Sparkassen, in their area.
The Sparkassen were instituted in Germany in the late 18th century as nonprofit organizations to aid the poor. The intent was to help people with low incomes save small sums of money, and to support business start-ups. The first savings bank was set up by academics and philanthropically minded merchants in Hamburg in 1778, and the first savings bank with a local government guarantor was founded in Goettingen in 1801. The municipal savings banks were so effective and popular that they spread rapidly, increasing from 630 in 1850 to 2,834 in 1903. Today the savings banks operate a network of over 15,600 branches and offices and employ over 250,000 people, and they have a strong record of investing wisely in local businesses.

The Bank of North Dakota and the Landesbanks are interesting models which could impact financial reform in the United States, but I doubt they can make much headway versus the loobying power of the financial giants, and the private is perfect mindset of the conservative movement.  Credit unions will probably be the main way in which the little people will be taken care of in the near future.

In the end, I think the strength of the German model is in the frugality of the citizens and the governmental manufacturing policy, which keeps the nation as a manufacturing exporter.  Neither of these policies is extremely compatible with American culture, and for a nation like Germany (or China) to be savers, other nations (the U.S., Greece, Italy, etc.) have to be borrowers.  As we've come to realize, you can't be net borrowers forever, which would tend to indicate that you can't be net savers forever, either.  As a nation, the United States needs to save more, while the Chinese and Germans need to spend more.  Personally, I probably need to spend more than I do.  As Keynes pointed out, the economy comes to a screaming stop when everybody tries to save.  That's where we are now.