New Jersey needs a public bank - fast | Opinion

By Brandon Castro

If the past three months have proven anything in New Jersey, it’s that we need money.

Not “we,” meaning our millionaires and billionaires and Wall-Street backed corporations. “We,” meaning workers. “We,” meaning communities of color. “We” means the poor, the working class and the near-mythical middle class.

“We” means the people hit hardest by the health and economic devastation brought by COVID-19.

“We” have big problems, and you can’t fix big problems without money.

We need the state to invest money into accomplishing good things for the public. To do that most effectively, we need a state-chartered public bank in New Jersey, and we need it fast because it can provide the resources we need quickly and efficiently, and it can stop Wall Street from getting its grubby little mitts on the profits.

Gov. Phil Murphy supported a public bank in his 2017 campaign and has formed a task force to explore how we can implement one. But the COVID-19 disaster and our looming budget crisis have highlighted the need to move quickly if we want the kinds of economic relief this bank can provide.

Alright, so how would a public bank work? The short, short version:

Today, New Jersey, along with every other state except North Dakota (more on this soon), deposits revenue into private banks that then invest our public dollars in whatever they see fit, wherever they want (read: not us). The banks’ profits often come from activities that aren’t in the public interest. They keep the fees, they keep the profits -- and they leave the state with no meaningful say in how the money is put to work.

A public bank is different because, by definition, it puts the public first. The state charters a bank in which it can deposit state funds then uses that capital to invest in, get this, New Jersey.

Creating a public bank provides opportunities via non-predatory, publicly funded credit for small businesses, public schools, green energy, public transportation, student loan relief, infrastructure – and other critical state assets that help our communities, mitigate disasters and provide good-paying union jobs.

And the profits go right back into that state bank. In 2018, the Bank of North Dakota, the only public bank in the United States, made $159 million in net earnings. The state’s return on investment was a walloping 18%.

In fact, since its initial investment in 1919, the bank has returned more than $1 billion to North Dakota. This figure doesn’t include the benefits from the economic stimulus the bank provides to agriculture and small businesses, and through home and student loans. No hedge funds. No private equity firms. Nothing to skim off the top.And especially relevant to today’s situation in New Jersey, the Bank of North Dakota (BND) has proven to be a very efficient investor in disaster mitigation.

During the COVID-19 crisis, the BND approved more than $5.2 million in PPP loans in just one month. And, it offered deferment on its $1.1 billion in student loans.

According to the president of the bank, Eric Hardmeyer, “the federal government figured out what we knew for years: The best way to deliver these disaster programs is through community banks.”

With New Jersey projecting a state budget shortfall of $9 billion due to COVID-19, we can’t afford to ignore new approaches for investment in social goals. A state bank better positions New Jersey’s economy to handle the next pandemic, the next climate disaster or the next economic crash.

Critics will claim that public banking only works in North Dakota because of its sparse population, but that’s not true. Germany has had an enormous amount of success using similar models in densely populated centers.

Critics have claimed that the BND only works because of North Dakota’s oil boom, and that’s not true either. The BND continued to be one of the most profitable banks in the country through oil busts and turned profits straight through the great recession in 2008.

It should be noted that this bank needs to be chartered democratically. The bank's entire portfolio should be visible to the public, and its board should be composed of stakeholders and elected representatives.

A public bank makes sense for New Jersey. It lets our state invest its own money, and it can move those funds quickly and efficiently -- with clear and transparent goals. If you’re a hedge fund manager, or profit enormously from state deposits into your bank, this probably all sounds pretty bad. For the rest of us, though, it’s time we moved ahead -- and fast.

Brandon Castro is the Public Need Program organizer for NJ Work Environment Council.

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