Can I Sign New Jersey Banking Presentation

Can i industry sign banking new jersey presentation fast

John Wright Meyer my colleague from NJ spotlight and expert on public finance this is a topic that we really want to dig into and that is governor Murphy says New Jersey is moving forward with a public bank it's been talked about now a little bit closer to reality John tiny bit well we're probably at least a year away still but in terms of since the governor took office at the beginning of 2018 nothing really had happened and so the now the governor has announced the formation of a 14 member board what he's calling an implementation board to take this idea and kind of bring it to scale and have a business plan have a set of goals and how they would actually create this idea of a public bank in New Jersey so let's explore that what is a public bank so we'll know more when we hear from this board but conceptually it's basically the idea of taking the deposits that right now governments across New Jersey put in commercial banks from all the way from the biggest international banks to to local community banks and and using those deposits to to provide capital for different things that right now might not get much attention from the commercial banks so you might have a big infrastructure project that can't get financing the government says well you know what we'll capitalize that and we'll use these these resources that right now we just park in a commercial bank and they don't really do anything for New Jersey they might do something for the shareholder of that Bank or to you know pump up the bank's balance sheet but in this case it would be used to do something that would be considered beneficial for New Jersey communities and even before the money goes out let's also just realize holding deposits you make money you make money overnight so you're earning interest just by holding those deposits yeah if you think about how like banking works in general banks pay people like me and you to deposit our money in in their institutions and then they charge people like me and you or maybe businesses to borrow that money and usually they make their money because they charge higher rates to be who are seeking to borrow than they pay to people who are seeking a place to deposit and so rather than had that profit mode of the idea of a public bank would be to take money that that these government agencies are already parking are already sitting somewhere and instead of getting meager interest payments on that on that taking that and using it to do something for the public good as will be defined by this board so proponents liked the idea that perhaps some underserved projects or people might be helped by a public bank they might have access right to money that they couldn't have otherwise isn't that a slippery slope because it is a public bank we need to make sure that they are holding people or things to the same standards as a private bank right I don't want to lend you money if you're not gonna pay me back just because it's a nice thing to do because then we're talking about state money at risk yeah and I think you could go even further right if if a private bank wants to engage in risky lending policies or practices we may think that's a bad thing and there's a federal insurance program but at the end of the day that's the private sector in this case it would be the public sector so I think you hit on a really key issue which is governance and what type of rules and restrictions are going to be written into the final version of whatever an enabling legislation is created to ensure that once sound lending practices are followed even if these are projects that can't get funding right now in the commercial market that they're still credit worthy projects or in the case of maybe student lending that these are still smart loans to underwrite but then also the insulation against you know undue influence from the political sphere or should we even say corruption I mean New Jersey has this long history of political corruption and interference and you know we're really gonna have to see what type of restrictions are written into and into the enabling legislation to see if there's any comfort against the idea that down the road this couldn't be manipulated for political purposes so for instance we're looking at investigations into the EDA right now and the worry would be you don't want to get New Jersey in the same kind of situation where money is going out to projects perhaps they weren't vetted perhaps there was influence so to your point governance is key and certainly given what's happening with the EDA you would think would be a priority in terms of getting this thing off the ground I mean that's a great example of I think probably well-meaning people who originally created some of these tax incentive programs wouldn't have thought that down the road you would have these questions about people potentially redeeming tax incentives and not creating jobs and I think you know you could look at that in the same way as if we create this public bank and we use all these public resources to capitalize it we want to be certain that those resources are being used for the best intentions and and not siphoned off to serve some political purpose if I give you a loan from the public bank the economy Falls you default I the taxpayer will be responsible for them well we'll have to see how irregular the regulations are written but that's one of the key issues it's a big risk yeah absolutely and I think even the Murphy administration officials will acknowledge that when you're doing anything in the lending in the let the lending arena you know there's a risk to it and you know loan officers are trained for a reason that said I think one of the attractions of this is right now when these deposits go to big banks they might not be based in New Jersey and they might not be writing loans off of the deposits that originated in New Jersey and the idea would be to take money that right now is going far afield may be being used for purposes that aren't in New Jersey's best interest even if we're one of the richer states that has a lot of deposits sitting somewhere in a bank - instead redirect all of those resources to underwriting credit worthy loans and for projects like affordable housing or infrastructure improvements that we desperately need in New Jersey that maybe not may not be finding adequate capital right now in the commercial market the potential pluses are big and we have a governor who used to work at Goldman Sachs so all that perhaps will be positive what is your guess on the feasibility of this actually happening any error so that's a good question so they this group has given itself a one-year runway to come up with a plan you know again governor governor Murphy took office in early 2018 where we're just now seeing a first step forward so I'd be surprised if we if if we if we're here next year talking about bank branches opening soon well we'll hold you to that we'll bring you back here if that happens John right Mayer thanks so much you're welcome