MY VIEW – ANGELA MERKERT

Santa Fe New Mexican | January 5, 2024
 

A recent Ringside Seat column by Milan Simonich (“Another $3.4 billion makes legislators dangerous,” Jan. 2) raised questions regarding legislator support for creating a state public bank in the upcoming session. There will in fact be legislation introduced, with revisions from past proposals. It is a viable answer to the lack of equitable access to capital, especially for small business start ups and expansions, as well as agricultural and food system needs.

Yes, the Bank of North Dakota, a huge success for the state, is often cited for good reason. In 2022 this bank generated a 19% return on investment on a loan portfolio of $5.4 billion and investments. The bank holds a credit rating of A+/Stable. It’s all done with a focus on investing in North Dakota business, agriculture and people. That kind of outcome can be developed in New Mexico.

The public bank failures noted are not so recent. Several occurred in the 1800s and early 1900s. The weak link in their failures was typically the governance structure — too much cronyism and weak business practices. The proposed Public Bank of New Mexico legislation addresses those issues as has the Bank of North Dakota, which is why it is so healthy.

In the history of the United States there have been four successful federal public banks, all closed due to sunset clauses in legislation demanded by Wall Street banks. Each bank was successful in achieving its purposes.

That track record is why legislation is being proposed in Congress for a national infrastructure bank, a federal public bank.

It is not “gambling public money” to create an additional tool in the state’s finance system to enhance the ability to invest in New Mexicans.

Initially the state public bank would focus on developing partner loans with community banks and credit unions to create more equitable access to capital for small-business entrepreneurs and to enhance lending for agriculture-related needs. More support then would be available to invest in climate-impacted adaptive practices by farmers and ranchers, along with food processing and distribution expansion. Why are we exporting 95% of our food production and importing 94% of what we consume?

Finally, loans made by the bank would be repaid with interest. The anti-donation clause would not apply because no gifts are being made. The state owns the bank and it is managed independently, similar to how the New Mexico Finance Authority is operated. That charge is a boogeyman.

What is so scary about placing at least a portion of the state’s revenue in a state public bank rather than in a Wall Street bank? At a state public bank, lending could be focused on local needs rather than exploiting regulations to enhance executive compensation and stock prices. Let’s invest in New Mexico.

Alliance for Local Economic Prosperity has indeed been advocating for a state public bank for four years. Operating by more democratic processes than the big banks and focusing on innovative ideas that community banks and credit unions cannot, or will not, engage on their own, will expand community wealth. These are not high-risk loans; rather, they don’t fit into those dark boxes that hold the computer-driven formulas driving decision-making. The public bank is in partnership to create those loans and small businesses expand and thrive. New Mexico revenue will remain safe, local and working for New Mexicans.

Angela Merkert lives in Albuquerque and has lived and worked in New Mexico for 18 years. She serves as executive director of Alliance for Local Economic Prosperity.

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