By Dorothy Gamble
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Green Fire Times | Jan/Feb, 2022
Currently, New Mexico’s money—three to nine billion dollars on any given day—is deposited and managed globally for profit elsewhere. The proposed Public Bank of New Mexico (PBNM) would safely invest our taxes and fees to improve the well-being of all New Mexican communities. Establishing a public bank will put the state’s financial investments and outcomes in the hands of the people, democratizing our money.
Defining a Public Bank
The Bank, guided by a mission statement to mobilize and redirect public revenue, will invest in healthy, culturally appropriate, environmentally sound, socio-economic development. It works in collaboration with local banks, credit unions, tribal entities, municipalities and Community Development Financial Institutions (CDFIs) by forming partnerships for local lending programs.
The PBNM is not a retail bank. It does not accept individual deposits and therefore does not compete with local community banks and credit unions. Its operational costs are reduced because it has no branches, tellers, ATMs, retail services or expensive marketing. The PBNM does not make loans to private individuals.
How a Public Bank Will Work
As proposed, the PBNM would collaborate with the state’s public and private financial institutions to invest in community development. The return on local investments will grow, becoming a steady revenue source. Economic models based on an initial $50-million capitalization from the state’s general fund and $60 million in deposits from which to leverage loans in the first year can, by the seventh year, have total gross loans amounting to more than $485 million. Growing such a lending fund changes the current problem of depending on boom and bust resources from volatile industries. The PBNM alone will not solve all of the weaknesses of NM’s finance system and low rankings on socioeconomic measures of well-being. However, it does set up a springboard for how to tackle those low rankings. In partnership with local banks, credit unions, municipalities and tribal entities, the PBNM’s collaborations can boost investment in local entrepreneurs who want to:
- Increase local agriculture and food growing and processing ventures
- Invest in renewable energy and related technological endeavors
- Invest in health clinics and community educational systems that recognize the most productive and creative people in any community will be healthy, knowledgeable and open to learning at any age
- Contribute to the diversification of the economy by helping small entrepreneurial activities grounded in local cultural and environmental regeneration
- Gain equitable access to financial resources in the parts of the state often neglected by national and statewide programs
Why the PBNM Would Be Transformative
Lending money is more powerful than saving money. The PBNM can leverage its capital by lending up to 10 times its equity value and still be profitable. That means money the PBNM lends and the profits can be the state’s next economic stimulus. Over the course of several years Public Bank supporters have studied the needs of local communities through work with academic and financial experts who understand the way the PBNM could be established. Review of NM Finance Authority (NMFA) and Economic Development Department (EDD) programs, work with faculty of the UNM Anderson School of Management and others with investment experience, and interviews with principals in the Bank of North Dakota, (the only existing state public bank in the U.S.), has convinced supporters as well as many N.M. legislators that there are needs in the state that the PBNM could effectively address. As a nonprofit, state-owned entity, the bank can make loans at a discount for regional, county, municipal and tribal projects. This precludes the need to engage in the bond market, which can add up to 30 percent to money borrowed. Right now, New Mexican tax dollars are slipping away from the state to stockholders of corporate financial institutions or gaining tax credits for people of wealth, many out of state.
Empowering Communities To Meet Local Needs
Public banks hold a bank charter legally subject to applicable state and federal banking rules, regulations and oversight. While the NMFA is the primary state agency designated for organizing bonds to loan money for county and regional projects, it does not have the authority to take advantage of all the possibilities a public bank offers. The NMFA has revolving funds only and cannot leverage its holdings tenfold as a bank can do. Also, the NMFA does not have access to the Federal Reserve System and therefore cannot increase its potential loan capacity. The PBNM could more effectively and efficiently make funds available quickly because of its partnerships with community banks and credit unions and its relationship with regional and tribal community development organizations. These local organizations are closer to people in smaller communities and know the needs, cultural strengths and community contexts.
The PBNM would collaborate with the state’s public and private financial institutions to invest in community development.
An October 2021 Report from the NMEDD entitled Empower and Collaborate pointed out obstacles to New Mexico’s economic future and strategies to achieve progress. Among the priorities listed were modernizing the economic development ecosystem, strengthening N.M.’s communities, reimagining education and training, promoting equity through economic justice, enabling high-quality home-grown innovation and diversifying the economy. Collaborative efforts with a N.M. public bank would respond to each of these priorities.
Community banks often have limitations on the kinds of loans they can make. Typically, community banks do not make shorter-term loans, loans for amounts under $100,000 or longer-term loans for three years or more. In addition, community banks are not usually
Examples of Why New Mexico Needs a Public Bank
- An Albuquerque manufacturing facility that produces fresh juices and other products had to obtain financing from a bank in Chicago rather than through local banking options.
- A retiree from Los Alamos National Laboratories invented an allergy remedy now sold in pharmacies throughout the Southwest. He was unable to secure a loan and was forced to use his own funds to finance his start-up company.
- A veterinarian who works at a small vet clinic about to be sold to a franchise wanted to buy the clinic but was unable to get a loan.
- A well-established farmers’ market in northern N.M. wanted to refinance the mortgage for its building. The group’s lender told them that it did not work on local deals anymore, and it had to turn to an out-of-state, regional bank for refinancing.
- A woman from Gallup who sells pottery found that her only financing option was a $7,000 loan from a payday lender, who charged 100 percent annual interest.
- Neither a coffee shop owner in Las Cruces nor a print shop
Support the Establishment of a Public Bank of New Mexico
Legislation for the PBNM continues to gain strength among N.M. legislators. First introduced as a “memorial” to study the benefits of a Public Bank in the 2019 legislative session, it was introduced as a bill to create a Public Bank in 2021. It was heard by several committees but did not get a full session hearing. Numerous organizations testified in support of the PBNM, including the N.M. Food and Agriculture Policy Council, the Young Farmers Coalition and the Healthy Soils Working Group. In addition, the state Credit Union Association, three city councils and four county commissions endorsed the establishment of a Public Bank. Support has come from more than a dozen legislators who have a strong interest in pursuing legislation in 2022 that will respond to the investment needs for their communities.
Since its origins in 2018, the Alliance For Local Economic Prosperity (AFLEP) has advanced a vision that supports the socio-cultural, environmental and economic needs of all New Mexicans, especially rural, Native American and Hispanic residents. A PBNM would democratize tax money by bringing it under the control of the state’s residents. We will again introduce legislation in 2022 based on the stories of New Mexicans who just want a chance to participate in building lively, economically active, healthy communities where the environment and cultural perspectives are respected and preserved. You can help this effort by learning more (visit AFLEP.ORG) and by writing to the governor and your legislators about how the PBNM could invest in your community’s needs.
Dorothy “Dee” Gamble is an outreach volunteer with the Alliance for Local Economic Prosperity.
This article is reprinted from the Green Fire Times, January/February 2022 issue.
