By Elinor Comlay

NEW YORK, June 4 (Reuters) - JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) plans to make more than $10 billion of new loans to U.S. cities and states before year end and the bank may be one of the few still willing to make large loans to local governments.

New Jersey said on Wednesday it chose to borrow up to $2 billion from JPMorgan Chase because the bank was the only one willing to arrange the line of credit without selling portions to investors. [ID:nN0388716]

JPMorgan can make bigger loans than many competitors because it has sidestepped the worst of the credit crunch, leaving it better capitalized -- it hopes to be among the first to repay taxpayer funds this month. The bank expects more municipal deals to follow the New Jersey transaction as the recession bites into state and local tax revenue.

"The phone's been ringing off the hook," since Wednesday, said James Lansing, head of debt capital markets and syndicate for tax-exempt capital markets at the New York-based bank.

Municipal finance has long been seen as a backwater on Wall Street, but that may change as state and local governments borrow more to make up for their shrinking tax receipts.

The National Governors Association said in a report released on Thursday that deficits could hit $200 billion to $250 billion over the next three years. [ID:nN04206080].

JPMorgan's willingness to make big loans "makes us stand out, that we're willing to commit like that," said Jeff Bosland, head of tax-exempt capital markets and public finance.

The bank has made or refinanced about $20 billion of loans to tax-exempt borrowers, including cities and states, in the last six months. JPMorgan does not disclose the total size and composition of its portfolio.