Election day for the New Jersey governor's race is around the corner, taking place Nov 7. Phil Murphy, who strongly supports creating a Public Bank of New Jersey, is leading in the polls by 12 to 18 points. He was endorsed on Monday by The New York Times. Earlier this year, The Hill published an excellent opinion article outlining the case for the state to create its own Public Bank. The same arguments can easily be made in other states and municipalities. If Murphy does succeed in this election, the issue of a state Public Bank suddenly becomes a winning platform issue.
New Jersey has approximately $12 billion of public funds invested in large banks such as Wells Fargo, Capital One and Bank of America. In 2015, Bank of America made only three small business loans in the state.
Murphy wants public deposits reinvested in the state.
This plan is one component of Murphy’s broader objective to stabilize state finances and revive New Jersey’s reputation as an investment hub for technology and innovation.
Under this proposal, the state and potentially municipalities would deposit their revenues with the public bank. That capital would be leveraged into credit to support economic development and public investments. The bank would support community banks by acting as a secondary lender to help them compete with big banks. This, in turn, helps small businesses and local economies as community banks account for most small business loans.
The bank’s profits are returned to the state through dividends. The state could borrow at reduced or zero interest for projects such as infrastructure improvements. Interest payments and fees to private banks potentially double the cost of such government projects, according to Ellen Brown, founder of the Public Banking Institute.