New Jersey should have its own public bank -- in fact, perhaps several of them dedicated to serve local municipalities and other targeted missions. These would not be retail commercial banks with typical customer services like ATMs, car loans, mortgages, and the like. They wouldn’t compete with community banks and credit unions; rather, they would partner with them as they do in North Dakota where the community bank environment is uniquely healthy and vibrant. A public bank of New Jersey could support development agencies and other state financing through low-cost loans rather than expensive bonds and exorbitant fees and interest.
The cost of financing our needs through private banks typically more than doubles the cost of government projects. If we lent the money to ourselves by borrowing it from our own bank, not only could we get the money at far less expense, but also we’d pay the interest to ourselves and thereby keep our money working for us within the state and building up the strength of our public bank.
To get it started, we could redeploy some of our existing financial assets and resources, perhaps even some pension-fund dollars, into capitalizing the public bank. That capital is never touched and is never lent out. Rather, it becomes the fulcrum with which to leverage up to 10 times its size in credit to the state.
For example, if we just took the $600 million we spent last year on fees and bonuses for private pension fund management, we could leverage $6 billion in credit for other state projects and needs. And for that matter, if the Bank of North Dakota experience is used, the pension fund would likely double its rate on returns in the process.
Keeping billions of New Jersey’s dollars at home every year pulsing through our state economy rather than supporting the high-risk and criminally challenged global Wall Street banks just makes sense. Now is the time to draw a line on this downward spiral of extractive debt payments and the crushing burden our citizens must pay for it.
Our state is wealthy; our equity and assets significant: with a, we can turn those assets into the funding we need to prosper.