“Politicians Want to Start a Bank. What Could Go Wrong?” is the title of my new Wall Street Journal op-ed about New Jersey Gov. Phil Murphy’s very bad idea.
The article will be paywalled for many, but you can read some of the journalistic coverage of the bank issue: Matt Friedman, Politico, Samantha Marcus/NJ Advance Media. Some articles I cite in my piece along with relevant links/research: The Economist on German Landesbanken, Aaron Fernando, The Progressive (citing German example, and noting current campaigns for city-owned banks in Los Angeles, San Francisco, Seattle, and other cities); Erica Jedynak letter, MyCentralJersey.com (“A 2011 report based on research provided by Federal Reserve Bank of Boston and other state agencies recommended the Massachusetts legislature not pursue the idea”).
Research on public-owned banks across the world suggests [that lending is politicized]. A 2002 paper from a Northwestern University economist found that areas with stronger political parties get lower interest rates from public banks. Political interference is likely the reason that public banks have been found to underperform compared to private banks in underdeveloped countries, according to a 2012 paper written by Taiwanese researchers.
On corruption rankings, Transparency.org on Germany; Five Thirty-Eight and Harvard Safra Ethics Center on U.S. states. On New Jersey’s outstandingly bad record for corruption: Olivia Nuzzi, Daily Beast and Philip Bump, Washington Post.