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Academic report touts benefits of state bank

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A state bank would create almost 100 jobs and boost gross state output by $15 million-$21 million annually, according to a report prepared for the William J. Hughes Center for Public Policy at Stockton University.

The report, “Exploring a Public Bank for New Jersey: Economic Impact and Implementation Issues,” was prepared by Economics Professor Deborah Figart at Stockton University, in response to Gov. Phil Murphy’s ongoing support for the creation of a state bank.

It estimates that every $10 million in new credit or lending by a state bank would yield between $15 million and almost $21 million in gross state output and between $3.5 million and $5.2 million in state earnings, and create between 60 and 93 new jobs as the result of additional lending.

Figart also recommends that Murphy create a team of independent consultants to conduct a feasibility study for the proposed bank and that the team focus on answering several questions, including:

  • What are the unmet state needs in economic development and infrastructure, and what is the estimated cost of those needs?
  • Where are deposits of all the state assets currently held, and what are the balances of all of the state liquid assets by financial institution?
  • What is the estimated economic impact of the State Bank of New Jersey on Gross State Product, Employment, Earnings, and Value-Added?
  • How will the State Bank of New Jersey be capitalized initially? Through issuing public
  • bonds?
  • Who will be required to deposit liquid funds in the State Bank of New Jersey? Only state departments in the executive branch of government? Would state authorities, agencies, and state-supported higher education institutions be required to deposit funds in the State Bank of New Jersey, and under what conditions?

“The exiting empirical research demonstrates that state banks would increase total lending within a state rather than [take from] local lending by local community banks working within their communities,” Figar told NJBIZ in an email. “This can seem unexpected but lending is not a zero-sum game.”

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Vince Calio

Vince Calio


Vince Calio covers health care and manufacturing for NJBIZ. You can contact him at vcalio@njbiz.com.

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John April 12, 2018 10:01 am

What about the impact on the private sector? How many existing State chartered banks would be negatively impacted by losing municipal deposits? What kind of lending would a state bank do? How much revenue would be pulled out of the private sector, especially the community banks that are the lifeblood of the small business market in New Jersey? How many private sector banking jobs would be lost? Are you really creating jobs or are you just taking them away from existing banks and moving them to state employees? Do we really need more state employees to have lifetime benefits and multiple pensions that the good citizens of NJ pay for, seemingly forever? There are 2 sides to this equation that must be thought out.

GIl April 11, 2018 10:54 am

The public bank institute, does a good job of detailing the benefits of a state bank as well.

Here's the catch though. It should be used primarily to buy ALL state and municipal bond offerings. This would effectively take back all the interest state/local bonds pay out to wall st and it becomes state revenue, to be "re-circulated" back into state services/infrastructure. The default rate on state/muni is VERY low, so good investment for state bank with multiple benefits. This purpose is very wise.

Just imagine if the state revenue included every penny of interest currently paid out by state/muni's on their bonds???

What the state bank shouldn't be used for is, student loans and small business loans, as these both have very high risk/default rates. Let the private sector accept and finance that risk.

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