Three of the state’s top lawmakers shot down Gov. Phil Murphy’s proposal for a state bank — a key promise he campaigned on, and has made virtually zero progress on since he took office nearly two years ago.
Senate President Stephen Sweeney, D-3rd District, as well as Senate Minority Leader Tom Kean Jr. and Assembly Minority Leader Jon Bramnick, both R-21st District, all questioned whether this system could actually benefit the state during a Wednesday afternoon panel at the New Jersey League of Municipalities conference in Atlantic City.
But Assembly Speaker Craig Coughlin, D-19th District, said he wanted to take a wait-and-see approach to what comes out of a committee Murphy formed to gauge how the state could actually implement the bank.
“There’s some things that will have to be addressed,” Coughlin told NJBIZ. “The benefit to the state, what’s the impact on community banks, smaller banks.”
A state bank would hold millions of taxpayer dollars, usually kept in commercial banks, and use the funds to finance local infrastructure, affordable housing, or student and business loans for lower-income residents who might not have access to that kind of capital.
Murphy has argued that much of that money has been deposited at large-scale Wall Street or overseas financial institutions, which invest the money into projects or ventures that do not benefit the state.
“Leveraging state resources to provide greater access to capital for our communities, small businesses, municipalities, and students is an important component of building a financially inclusive New Jersey,” he said Nov. 13 at a signing of the executive order creating the board.
The 14-member Public Bank Implementation board will have a year to figure out how New Jersey can roll out the state bank.
The proposal has also been met with outright opposition from NJBankers, a trade group representing financial institutions in the state.
“[A] state bank makes no sense at all. It’s corruption, ineffectiveness,” Kean said. “You’ve got robust competition [in] the private sector.”
Bramnick agreed, saying that the bank “is going to make decisions that are political in nature.”
Still, Coughlin dismissed those concerns as “speculative.”
Only one other state has such a bank — North Dakota, which created the program in 1919.
“If it was so good we would be the 50th state, not the second,” Sweeney said. “When you talk about making college loans, they’re the most defaulted loans of all.”
Tim Sullivan, who heads the Economic Development Authority, assured that the board would hash out how it could mitigate the risks inherent to lending to individuals that might have a hard time obtaining loans.
Editor’s note: This story has been updated to included comments from Assembly Speaker Craig Coughlin.