Since banks were deregulated during the administration of President Ronald Reagan in the 1980s, there has been an orgy of predatory capitalism with regard to commercial and financial speculation in the banking industry. This comes with a monopolistic concentration of financial power in the hands of a tiny group of filthy rich capitalist oligarchs controlling almost all of the nation’s financial assets.

Since deregulation took effect, there was excessive, widespread and rampant speculation by greedy capitalists in the financial services industry. The result of all this “irrational exuberance” led to several cycles of speculative financial bubbles followed by extreme losses when the bubbles collapsed.

The end results of the mismanagement of capital resources by greedy investors and financial oligarchs were severe recessions beginning in 1987 and again in 2008. While rich capitalists were able to survive the experience, millions of working class families lost their jobs, their homes, their cars, and couldn’t even afford to eat.

With the collapse of commercial banks and investment firms, there was a growing outcry that a new system to provide financing and needed capital for public welfare was needed. Advocates of banking reform and economic justice began to consider developing new sources of financing for the development and use of capital resources that would benefit the public interest, not enrich the bank accounts of greedy investors and capitalist oligarchs.

When Democrat Phil Murphy ran for Governor of New Jersey in 2017 among his most ambitious proposals was the creation of a state-owned public bank that would leverage the state’s tax deposits to provide loans for college students and small businesses, as well as credit for public works, infrastructure and community development projects at interest rates significantly below those charged by predatory lending institutions.

After he became Governor, Phil Murphy issued an executive order in 2019 to establish a Public Bank Implementation Board. The Board’s mission was to assess the need and opportunities for providing credit and capital resources to communities, residents, organizations and small business that otherwise would not have access to affordable credit from private sources.

Another advantage of having a public bank was to use state tax deposits as leverage for financing public infrastructure and community development projects without the need to obtain financing at higher interest rates and extraordinary fees from Wall Street connected private investment firms. This would stimulate the state’s economy and provide jobs for thousands of workers without the need to rely on predatory capitalists to obtain loans at higher interest rates for development projects which would benefit all the state’s residents, not private investors.

The need to address issues effecting the impact of climate change, especially in New Jersey, is also a motivating factor for environmental activists to support a public bank. The bank would utilize state tax deposits to subsidize investments in clean, renewable energy sources such as wind turbines and solar panels.

With Wall Street connected private investment firms and commercial banks reluctant to provide financing for clean energy projects, demanding higher capital requirements and charging higher interest rates than they would for the fossil fuel industry, a public bank would compensate for private capital interests and charge a lower interest rate. This would stimulate development and growth of emerging small businesses and companies that specialize in providing renewable sources of clean energy.

Unfortunately, the Public Bank Implementation Board (PBIB) was hampered in its mission by the Covid pandemic that virtually shut down the state’s functions and delayed progress to explore viable options for establishing a functioning state-owned bank. Another obstacle was ferocious opposition from corporate Republicans as well as banking and corporate business interests.

Despite recent difficulties the PBIB did manage to hold a series of public meetings to hear testimony and comments from a diverse group of public advocates and private business interests. As a result of those hearings in 2022 Governor Murphy signed legislation establishing a Social Impact Investment Fund (SIIF) and appropriating $20 million for it.

The SIIF will be used to support projects in economically disadvantaged communities across the state which will have a socially beneficial impact. The fund will be used to finance development that benefits the public interest, not private investors. These include affordable housing, public infrastructure, and early childhood education centers.

In February, 2024, the PBIB submitted its final recommendations for creation of a public bank for New Jersey. Although it was unable to successfully provide a viable model to establish a full-service, publicly owned state bank for New Jersey, it did recommend specific policies that might someday lead to having a public bank.

The PBIB did recommend using the SIIF as a “bridge” to eventually create and charter a public bank which would provide demand deposit opportunities and savings accounts to the general public with funds to be used for development projects and financing opportunities to economically disadvantaged communities. Until a full-service public bank is created, the SIIF can accept deposits from community groups, philanthropic foundations, and other charitable organizations that are willing to accept below-market rates of return on their investment.

With public outrage at the consolidation of financial power within a small group of predatory capitalists, investment firms and corporate banks, New Jersey is not the only state where movements to create public banks are gaining increasing momentum. Several states, cities and counties have taken the first steps to creating public banks and other community-owned financial institutions.

In 2019 the governor of California Gavin Newsom signed a bill allowing counties and municipalities to establish public banks. Two years later he signed another bill that appropriates funds for a state commission to analyze the prospects and feasibility to establish a state bank that would also function as a commercial bank to provide personal financial services for residents of California.

With the California Public Banking Act of 2019 signed into law, cities and counties in California began the process of establishing their own public banks. With support from grass roots community organizations, the Los Angeles City Council passed a law in 2021 to study the feasibility of setting up a public bank.

Recently, the City Council of Los Angeles voted to appropriate $460,000 for funding additional means toward officially establishing a public bank. In doing so Los Angeles became the first city to actually appropriate funds to enable that effort for public finance to succeed.

The San Francisco City Council also voted unanimously for a law to create the process for setting up a city-owned bank that would be similar to Los Angeles. The long-term plan would be to pass an ordinance that would facilitate the process for a city-managed corporation to receive public deposits.

With public support, the Bank of San Francisco will invest deposits from tax receipts to provide credit and loans for low-income borrowers and disadvantaged groups, small businesses and community organizations which otherwise would not have access to credit from for-profit commercial banks. Eventually, it is hoped that a municipal bank in San Francisco would be able to offer personal financial services to depositors whose funds would be insured by the Federal Deposit Insurance Corporation.

While New Jersey has only been taking baby steps to establish a full-service state-owned public banking facility, across the Delaware River in Pennsylvania the City of Philadelphia, like San Francisco and Los Angeles, has already passed a law to set up a municipal bank. This would leverage the city’s tax receipts for extending loans and other credit to disadvantaged and low-income communities, as well as finance improvements to public infrastructure and projects that benefit and serve the public welfare, not private capital interests.

At the national level there is also significant interest in establishing a government-owned permanent funding facility for improvements to public works and infrastructure, eliminating the need for states and municipalities to depend on predatory capitalist interests for needed projects and development. The National Infrastructure Bank Act was introduced in Congress to provide a permanent solution to funding for infrastructure and public improvements.

The Bank would function as an independent agency, like the U.S Postal Service, operating entirely by authority of Congress under the supervision and control of the federal government. The Bank would be authorized to sell securities to the public for funding purposes, collateralized by US Treasury bonds.

The proceeds from the sale of securities would then be loaned at favorable, non-predatory rates to states and local governments for public improvements and infrastructure. These loans will support specific improvements in areas that benefit the public, including but not limited to transportation, water projects, environmental improvements, internet access, affordable housing, and many more areas of concern.

Despite all the controversy and opposition to public banking in other jurisdictions, the State of North Dakota already has a public bank, the Bank of North Dakota, that has been in existence for more than a century providing loans and financial credit to farmers, small businesses and community organizations. There is already a successful model for public banking available there that other states and local governments could follow. All that is needed is the political will to do so.

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