Leading Democratic Candidate for New Jersey Governor Calls for State-Owned Public Bank

Posted April 19, 2017

MP3 Interview with Walt McRee, executive director & chair of the Public Banking Institute, conducted by Scott Harris


After the meltdown of the U.S. and much of the world economy in 2008 and 2009, movements including Occupy Wall Street emerged that condemned Wall Street for its role in exacerbating growing income inequality in America. Beyond simply slamming the system, some progressive economists and activists put forward a number of ideas for restructuring the U.S. financial and banking system that offered alternatives for a more equitable model to better serve the interests of consumers, small business and the nation as a whole.

Among those ideas was support for a government bank that offers competition to the nation’s largest privately-held banks that recklessly engaged in casino-like gambling and lost billions of dollars of their customers’ investments during the Great Recession. The public banking option comes from the successful example of the 98-year-old Bank of North Dakota, the nation’s only statewide publicly-owned bank. Some observers credit North Dakota’s public banking system for the state’s low unemployment rate and large budget surpluses during the economic collapse.

Between The Lines’ Scott Harris spoke with Walt McRee, executive director & chair of the Public Banking Institute, who discusses the recent proposal for the establishment of a public bank in New Jersey made by Phil Murphy, a former Wall Street executive who is now a leading Democratic party candidate running for New Jersey governor.

WALT MCREE: A public bank is a bank that is owned by the people; owned by the public. And typically, in the instances that we refer to it, it's owned by the cities or the counties or the states that own the bank. So instead of shareholders and stakeholders, you have the citizens who are the ones who use the bank and benefit from the bank just as if they had a private bank. And the power of that is that the franchise of banking is basically a license to create money. You know, it's a proven franchise that works brilliantly and of course, can be misused. But the public's potential here is to be able to keep the money that is collected as taxes and fees and licenses ... all the money that comes over the transom of the body politic is kept at home in our own bank instead of sent off to Wall Street.

And of course, when Wall Street gets the money, they go off and they use it to leverage and make profits and play the global casino of speculation. And they do very well, and they do that with our money. What the public bank does is basically gives it a new place to go so that the city, the county and the state, can design, create and fund, finance itself for things like infrastructure or student lending or perhaps affordable housing. A host of things that all of us know that we'd like to have our communities be able to do but haven't had the money to do that. So it's really quite a new day.

There's only one public bank in the United States at the moment. That's the Bank of North Dakota, which has been called the most profitable bank in America. It outproduces by 70 to 100 percent the return on equity of the Wall Street banks – JP Morgan Chase, Goldman Sachs. It's a highly productive bank that has been financing North Dakota and stabilizing that economy for 98 years.

BETWEEN THE LINES: Since its founding in 2010, yourself and Ellen Brown, the founder of the Public Banking Institute, have been proselytizing across the country, advocating for public banks to be established elsewhere apart from North Dakota. Now we have a Democratic candidate for governor in New Jersey, Phil Murphy, who's really made establishing a public bank in New Jersey one of the centerpieces of his campaign to win the governorship there. Maybe you could tell us about what's going on in New Jersey and if you're optimistic that we could finally have a second public bank established in another state after all these years.

WALT MCREE: Yeah, we get a new one every hundred years. You know, that's a trend. Actually, Phil Murphy's candidacy in New Jersey is big in many ways because it has mainstreamed the awareness of what a public bank is, as well as brought it into even a mainstream political environment. Phil Murphy has a Goldman Sachs background. He's a banker, and as Ellen Brown says, you know the reason he gets it, he's a banker, he knows how banks work. And how it can be used. His candidacy is doing very well and he seems to be the odds on favorite to win. He's very serious about it. New Jersey is a rich state, but it's in a basket. It's in a basketcase. It has huge debt, and Murphy feels that by having a public bank, they'll do exactly what I said earlier. "We'll keep our money in the state, invest in ourselves, finance ourselves." And so we're really very hopeful. And the people in the vibe in New Jersey are very strong. Certainly there are people pushing back, but those are often people from Wall Street, the big banks and the other side of approach here.

Around the country, there are over 50 initiatives underway now. It's really a growing movement and it is indeed movement. We have the city of Santa Fe is getting very close to the point where they're going to be assigning a task force with a charter to get a bank chartered there. In Philadelphia, that is also right in the middle of the city council at the moment. Oakland, Portland, Seattle, about nine cities in California, including the state, Arizona, New Mexico, Albuquerque and Santa Fe, I mentioned. Minneapolis is taking a look at it. There's Massachusetts, also Vermont, New Hampshire, Maine, Maryland and the state of Pennsylvania are the ones that come to mind. I've left out Michigan and Illinois, but you get the picture. It's a pretty exciting prospect not happening too soon.

For more information on the Public Banking Institute, visit publicbankinginstitute.org.

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