Jim Johnson Challenges Phil Murphy’s Public Bank Proposal
Calls Again for Top-to-Bottom Ethics Reform in Trenton
Today, Democratic gubernatorial candidate and former Undersecretary of the Treasury Jim Johnson challenged his opponent and former Goldman Sachs executive Phil Murphy’s proposal to create a public bank in New Jersey. Johnson argued that not only is a public bank a bad idea, but also impossible to create without top-to-bottom ethics reform in Trenton. Johnson has laid out five reasons why a public bank would do more harm than good in New Jersey.
“After 11 credit downgrades, the emptying out of the school construction fund, the near collapse of our pensions, grossly underfunded public infrastructure, and catastrophic failures of core government functions like transportation, New Jersey taxpayers know that the last thing we need is another Wall Street gimmick. Murphy’s public bank is just one more bad idea that will be poorly executed at the expense of taxpayers,” said Johnson.
“Phil Murphy’s public bank proposal is a misguided and vague idea that should not be taken seriously,” continued Johnson. “While Murphy argues that a public bank would help our economy by saving taxpayer money and increasing investment, I, along with many policy experts, believe these expectations are false and that the bank would serve as a great danger to New Jersey taxpayers.”
- A Public Bank Would Actually Increase Risk To Taxpayers.Murphy’s bank would not be backed by the FDIC, but rather by “the full faith and credit of New Jersey.” The bank would lend taxpayer dollars used for operating expenses, employee salaries and other essential parts of government. If future Governors make poor fiscal decisions, government operations could be put at risk. And if New Jersey suffers more credit downgrades, taxpayers and residents with loans tied up in state bank funds would suffer the risk — not Murphy.
- Other States With Economies like NJ Have Concluded That It’s A Bad Idea. Murphy often cites Massachusetts as a model state, but even Massachusetts has concluded that a public bank is a bad idea, arguing that the “funds would be exposed to very high risk, the bank could require significant initial start-up capital and that the economies of North Dakota and Massachusetts were vastly different.“
- The Idea Has Not Been Thought Through. Murphy hasn’t even thought through the structure of the bank, including whether the Governor would oversee the bank, like he does in North Dakota. As recently as last week, when asked who would oversee the public bank, Murphy responded, “I haven’t thought about it, to be honest with you, as to whether the governor would sit on the board and oversee it.“
- A Public Bank Can Be Used for Political Purposes. A public bank, run by politicians and overseen by a Governor, is not immune to political pressures and can easily be directed away from its original intent. For example, the Bank of North Dakota most recently lent nearly $10 million to local law enforcement to fund their harsh responses to nonviolent protests near the Standing Rock Indian Reservation and Cannon Ball, North Dakota. Likewise, future New Jersey Governors could use the bank for his or her own political aims.
- Phil Murphy Was Already A Partner At Another Bank: Goldman Sachs. Goldman Sachs sold billions of dollars in securities shorting personal home mortgages. His bank bet against Americans and their dream of homeownership – and then made millions when Americans lost not only their financial security for the future, but also their homes. With the highest foreclosure rates in the country, New Jersey is still reeling from the 2008 housing market crash.
“Why should voters trust former Goldman Sachs executive Phil Murphy or Trenton with their money? The Wall Street approach is to throw money or take your money — we’ve seen the effects of that approach right here in New Jersey with our worst-in-the-nation foreclosure crisis. Furthermore, Trenton already oversees trust funds to build our schools, pensions, and highways. Clearly, the answer is not to give Trenton more control — and why would we when it has long been ripe with issues of political corruption and patronage? New Jersey doesn’t need a Governor who is interested in running another bank. We need a Governor who is committed to addressing the multifaceted aspects of rebuilding our economy and restoring trust in our government.”
Johnson is the only candidate in the race to propose comprehensive ethics reform in New Jersey. To address the self-serving politics of Trenton, as Governor, Johnson will eliminate no-bid contracts, enact strong rules against lobbying, implement a transparency pledge and permit only one public pension per official. Johnson’s full ethics proposal can be found here.