Montana - banker to the world?

• Author: Boulard, Garry
• Position: Legislation to attract foreign capital - Includes related article on Bank of North Dakota

The Treasure State has come up with unique legislation to encourage an influx of foreign assets.

The stark contrasts between vast and windy Montana, where a 500-acre cattle ranch is considered small potatoes, and the sun-drenched Cayman Islands, whose sandy shores are a welcome refuge for some of the richest people in the world, are so great as to be obvious.

But that has not stopped journalists from pointing them out.

In recent months everyone from the Wall Street Journal to Forbes magazine and the San Francisco Chronicle has taken pains to mention that Montana is no warm Caribbean getaway, nor for that matter does it bear even a passing resemblance to Switzerland, another nation the press compares to Montana.

But there is in fact a thread that connects all three places, thanks to an unusual bill passed overwhelmingly by the Montana Legislature last year that hopes to expand the Big Sky country into something far wider and entirely international.

Senate Bill 83, sponsored by Senator Mike Sprague and signed into law last April by Governor Marc Racicot (Roscoe), allows rich foreigners seeking privacy and protection to stash their money and other precious assets in a series of depositories overseen and regulated by the state. As far as anyone knows, Montana's Foreign Capital Depository Act is the first of its kind in the nation. It's the only time a state has sought to offer financial services normally associated with the banking infrastructure of foreign nations. The legislation could bring into Montana not just millions in anticipated revenue, but hundreds of millions and perhaps even billions.

Foreign capital depository fans say this idea is not as farfetched as it might seem. There aren't a lot of safe sanctuaries for wealthy foreigners seeking privacy and protection for their money. To the question of "why Montana?" supporters answer that the very improbability of the proposal is its attraction. Montana could be an ideal place to stash billions simply because of its improbability as a major international finance center. It is far away from the same global depository haunts that attract layers of lawyers, international criminals and professional money launderers. And at the same time, it is smack in the middle of an extremely stable state in an extremely stable country. And it has the strictest privacy and confidentiality laws of any state.

As the legislative subcommittee report studying the potential of a depository noted: "Montana is securely ensconced in the most stable political space on the planet. As far as we know, nobody is plotting a palace coup or planning to nationalize the banks, mines and railroads." That the state also is a source of abundant precious metals, which could be purchased by wealthy foreigners, makes the case for Montana on the world market practically irresistible, advocates say.

THE ALLURE OF RICHES

Inspiration for the bill came from Robert Svoboda, a native of Lewistown, who built a local insurance agency into a $400 million empire, moved to southern California, and became convinced that Montana stood to make big money through fees from foreign dollars deposited in the state. Svoboda first broached the idea to Kenneth Byerly, the 89-year-old long-time publisher of the Lewistown News-Argus, who liked the concept so much he began to editorialize about it regularly in his paper. "I am like everyone else," confesses Byerly. "At first I thought it was kind of a crazy idea, but the more I learned about it, the more I thought Montana had everything to gain and nothing to lose."

Svoboda's idea eventually made its way to Governor Racicot's office where an assistant passed it along to Senator Sprague. Was the freshman lawmaker interested in studying the potential of foreign capital depositories in Montana and helping to draft a bill? Sprague said he was. "I didn't know if I was being led to the slaughter," Sprague now says, "but I thought it was worth looking into.

"It is a tremendous opportunity for the state," says Sprague, who contends that even though the legislation is important and historic in terms of its potential financial significance, it is still in harmony with his philosophy of keeping government as small and efficient as possible.

"The government's role here is only as a facilitator," he continues. "The government sets up the rules, monitors your progress and ensures compliance. Otherwise it is all private enterprise. We created it with the idea of letting you do it your way; we have no set definition...