Republicans on the state Assembly Financial Institutions and Insurance Committee asked representatives of the New Jersey banking industry Monday about the feasibility of Gov. Phil Murphy’s big idea to use the state’s checking accounts to launch a state-run public bank.
Murphy envisions taking state funds now deposited with large commercial banks and use them to back low-interest loans; including student loans, small business loans, and small-scale infrastructure projects for cities and towns.
Republicans were largely concerned that a state bank would invite political corruption and be a big a risk to taxpayers.
During Monday’s hearing, Robert Auth (R-Bergen) asked if a state-run bank would be vulnerable to the state’s notorious political corruption and influence.
“I don’t think it’s beyond the realm of reason to think that there’s a possibility that somebody might call somebody in New Jersey and say ‘Hey, give this entity a loan,’” Michael Affuso, executive vice president of the New Jersey Bankers Association, told the committee.
Assemblywoman BettyLou DeCroce (R-Morris) asked the rhetorical question of who would be liable if the state bank were to fail during an economic or budgetary downturn.
“I would say the taxpayers,” Affuso said referring to the Senate version (S885) introduced last week by state Sens. Richard Codey and Nia Gill.
The bill gives no indication of how much the start-up costs would be nor how the state bank would be funded.
While several states owned banks during the 1800s, only North Dakota currently operates such an institution — a state that doesn’t exactly share much in common with New Jersey even today.