It has been suggested by one of the New Jersey gubernatorial candidates that a public bank, modeled after the public bank in North Dakota, could begin to address New Jersey’s obsession with fiscal irresponsibility. Quite the contrary. In its proposed form it would only open up new avenues for corruption.
New Jersey has made pension promises it cannot keep because Trenton struggles with basic math calculations. We have squandered the Transportation Trust fund because we assumed potholes and bridges would fix themselves. We have allowed the State House itself to deteriorate to the point of physical danger, even though the best and the brightest have roamed its halls for years, witnessing the deterioration and doing nothing. We have bankrupted Atlantic City because we were too incompetent to manage a casino operation that statistically could not lose.
Now, all of a sudden the same team in Trenton can run an advanced public bank?
In order to set up a public bank, the state would need significant capital. What will we use for capital? There are three potential sources; a) the cash that the state utilizes to pay its monthly bills and employee payroll, b) existing long term investment funds and c) borrow more money. The state currently has $500 million in cash on hand, and $1.2 billion in CD investments, and a severely underfunded pension system. Do we really believe now is the time to start risking our taxpayers money?
All three capital choices create a significant danger for the taxpayers; increased debt and an empty checkbook. If the public bank has problems, the state cannot make payroll and you get to pick up the tab. There will be no help from the federal government or the FDIC to insure deposits.
Most troubling is that all the risk with running a public bank will move from the commercial banks that we do business with now, onto the backs of the taxpayers of New Jersey. Perhaps that is the real goal. Protect Wall Street from New Jersey investment risks and hang the taxpayers out to dry.
North Dakota started its public bank (the only one in the United States) because of a very unique set of circumstances in an agricultural community without access to Wall Street. New Jersey has ready access to one of the largest financial centers in the world – the benefits from a public bank, as currently proposed, are far inferior to the very real risk our residents would have to take on.
New Jersey has a multitude of challenges that can be overcome if we can muster the political willpower to do things differently, primarily putting the citizens of this state first, and casting all special interests to the sidelines.
Instead of risking taxpayer dollars to create a needless public bank that acts like a commercial bank, what we should do is address the absence of banking options in economically struggling neighborhoods. We create a public depository bank that offers checking, savings, online banking and check cashing facilities so people without access to traditional financial options can have the same bank transaction opportunities available to the majority of New Jersey residents.
This depository bank would not risk taxpayer dollars on commercial loans, instead it would only invest its money in long term infrastructure projects that directly benefit the neighborhoods that utilize the bank. Returns from the banks investments would solely be used to cover the banks operating expenses and for the good of the communities it serves.