New Mexico Roundhouse. Photo by cmh2315fl, Flickr (CC BY-NC 2.0)
By Paul O’Connell, KRWG | January 28, 2021
Public Banking is gaining interest across the country from California to New Jersey. It can occur at any level of government—city, county or state. Rather than owned by the private sector, it is a public institution like a University or Water Utility answering to the public it serves rather than stockholders.
New Mexico is now considering a state Public Bank in the 2021 state legislative session. The effort is led by an organization called Alliance for Local Economic Prosperity. It would be a Bankers’ Bank, increasing the loan capacity of Community Banks and Credit Unions.
I disagree with my economic colleague Chris Erickson that one is not needed in our state. The private banking system has not served New Mexico well—especially large national banks like Wells Fargo and Bank of America who have both been fined for mismanagement–like opening fraudulent accounts for customers without their consent and lying to its customers about management of their stock trades. These banks answer to Wall Street investors–not to their New Mexico customers.
I worked for the World Bank in Washington DC for 12 years after I left the Federal government in 1994. In that position, I worked in many poor countries that needed help like access to finances for value-added industries: Infrastructure to get their products to market, workable communication systems, honest accounting and trained workers.
We have similar problems in New Mexico, as one of the poorer states in the U.S.
Much of our agriculture, energy and mineral outputs are shipped out of State to be processed and then sent back as finished goods. Yes, interest rates are low and banks are flush with money, but New Mexico banks are very conservative in their lending practices.
Predatory loans are common, small entrepreneurs are not given a chance and college students pay high interest on their loans.
In North Dakota, they’ve have had a workable public bank for over 100 years and they have done very well—twice the number of Community Banks and Credit Unions per capita as in NM and the lowest interest student loan rates for North Dakota college students in the country.
