Consumers deposit money in banks to earn interest, borrow from banks by paying interest, and pay various fees for bank services such as checking. If they had lots of money, they could use their funds as their own bank, saving on their interest and fee payments while making money by lending to others or providing services.

That’s the basic idea behind Gov. Phil Murphy’s plan to create a New Jersey publicly run bank. Instead of using commercial banks, the state would hold its own money, place some of it in financial markets for gain, and lend some out to earn interest and help people and businesses who might not qualify for loans from regular banks.

The governor ordered the creation of a panel to study how to establish the bank and report back within 12 months.

The first reason to suspect that a New Jersey public bank may not be a good idea is that only one other state has one — North Dakota. That utterly rural and remote state created its public bank a century ago because it lacked enough in-state banks to provide loans and services to its farmers. That’s hardly the case in New Jersey.

The New Jersey Bankers Association opposes Murphy’s plan, in particular worrying that it would be subject to cronyism and political influence. Its executive vice president, Mike Affuso, said the first requirement of such a bank would be “to ensure the bank is not subject to political pressures and is not a political animal, and in New Jersey that will be difficult.”

The association also said the state could simply move deposits currently held in foreign or out-of-state institutions back to New Jersey banks, accomplishing one of Murphy’s public bank goals.

Murphy had proposed creating a public bank during his campaign. A few months into his term last year, the William J. Hughes Center for Public Policy at Stockton University issued a report estimating that whatever new lending the bank made would lead to an increase in economic output and jobs. The report also called for the governor to have a team of independent experts study the feasibility of the proposed bank and have the state treasurer and banking commissioner draft a business plan for the bank. Murphy did something like that last week.

Murphy said a public bank could provide “below market rate” loans to socially beneficial projects, affordable housing and student loans.

His desire to create a bank to help advance social policies raises another red flag. One can easily imagine a future in which a New Jersey public bank has made lots of loans to help favored constituencies — and now taxpayers might be responsible when many of them default.

Two more concerns are relevant. State government has one of the worst credit ratings in the country, one of the biggest debt burdens and one of the largest unfunded pension and benefit obligations. In short, it is nearly the worst state in the nation at managing its finances. Is such a state likely to run a public bank well, even if its governor is a retired Goldman Sachs senior director? The record of the previous Goldman Sachs governor, Jon Corzine, suggests not.

And banks are constantly seeking greater efficiencies in order to reduce costs and keep rates and fees competitive. New Jersey has never been efficient because it can just make taxpayers give it more revenue. Lower-cost loans and cheaper services than commercial banks may be a pipedream.

Finally, the North Dakota public bank actually does turn a profit much of the time, and that money goes to the state budget — to help offset taxes.

In New Jersey, if there’s a profit from a public bank, the track record suggests government officials will find a way to spend it rather than lower taxes.

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