Fulfilling a campaign promise by Governor Phil Murphy, a recent bill (S885) introduced by state Sens. Richard Codey and Nia Gill seeks to create a state-run financial institution to host state deposits, make loans, and purchase mortgages from commercial banks under the guidance of a 13-member board of directors. The state bank would also fund transportation project loans, small business loans, student loans and have the power of eminent domain. Critics say local community banks already provide these services and reinvest this money back into local communities, who in the end will suffer. There is currently only one other state-run bank in the United States, located in North Dakota.
Text from Bill S885 reads:
1. This act shall be known and may be cited as the "State Bank of New Jersey Act."
2. The Legislature finds and declares that:
a. Access to capital is vitally important for the health, security, and well-being of all individuals and businesses in our State. They are the economic drivers that help New Jersey’s commerce run smoothly. The lack of accessible capital, as currently experienced due to the economic downturn, is exacerbating the economic hardships being faced by working families and businesses;
b. By creating a State bank, the State is able to direct economic development policy initiatives in a responsive and efficient manner to benefit citizens of New Jersey;
c. The mission of the State Bank of New Jersey shall be to promote small businesses, fair educational lending, housing, infrastructure improvements, community development, economic development, commerce, and industry in New Jersey. In this role, the bank shall act as a funding resource in partnership with other financial institutions, economic development groups, and guaranty agencies;
d. Accuracy of financial reporting and compliance with all applicable laws and regulations shall be an integral part of the State Bank of New Jersey’s overall risk management strategy; and
e. It is the intent of the Legislature that State funds and funds of State institutions may be deposited at the State Bank of New Jersey and guaranteed by the State. Other deposits may be accepted from any public source. The State Bank of New Jersey shall be operated to benefit the citizens of New Jersey.
To read the full bill, click here.