A public bank for New Jersey: Groundbreaking idea — or just wacky?
Democratic gubernatorial nominee Phil Murphy in most ways adheres to the standard progressive political platform of 2017. But he’s got one major, unique policy proposal – the creation of a public bank into which New Jersey state government would deposit all its tax collections and from which it would make loans.
The plan hasn’t gotten much attention, including just one mention across the three official debates.
But it’s still part of Murphy’s plans, and was among the topics raised when Murphy recently did an interview with the Pod Save America podcast hosted by former aides to President Barack Obama.
“People say to me all the time, ‘Hey, Murph, if it’s such a good idea, how come nobody else has done it?’ And I think the answer is the big banks don’t like it, and they’ve lobbied hard against it,” Murphy said.
Only one state has a public bank – North Dakota, founded a century ago. There have been proposals in other states, but none have been enacted.
There’s reason to doubt a New Jersey bank would become a reality, said Michael Affuso, executive vice president and director of government relations for the New Jersey Bankers Association, which has concerns about Murphy’s proposal.
Affuso said the territory of American Samoa has been denied a charter for a public bank its government chose to create after the New Zealand-based bank that was the island’s last bank departed a few years ago.
“So if they deny American Samoa, which is extraordinarily poor and has no banking entities, what makes you think they’re going to accept the state of New Jersey to do it?” Affuso said.
Murphy says a state bank would do all its lending in New Jersey, toward student loans, small businesses and small municipal infrastructure projects. He said the state’s tax collections, more than $10 billion a year, currently are put into foreign banks and bonds and Wall Street banks.
“Listen, the good news is our tax dollars are funding infrastructure, which we desperately need. The bad news is it’s getting funded in Japan and Sweden,” Murphy said.
In the issue’s sole mention in the debates, Murphy focused on the student-loan angle.
“We love the idea of a public bank that we all as citizens own, and one of the lines of business is reasonable student loans,” he said.
Lt. Gov. Kim Guadagno, the Republican nominee for governor, ridiculed the idea.
“The public bank of New Jersey is what I call the wacky bank of New Jersey. I can’t imagine a worse idea than giving all of the receipts to some bureaucrat in Trenton to hand out to other people,” said Guadagno. “The idea of a bank handing out loans to students is just beyond-words Fantasyland.”
Murphy said he wouldn’t change the way local governments deposit funds in community banks. But Affuso of the New Jersey Bankers Association worries because there are so few details – and $20 billion in such funds.
“Because you don’t have anything in writing, you just kind of try to analyze the rhetoric. It makes it a little bit difficult to have a position,” said Affuso, who said Murphy has dialed back earlier criticism of a community bank he felt wasn’t making enough Small Business Administration loans.
“My real concern is: Does he pierce the municipal deposits?” he said.