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No public bank for Santa Fe

Santa Fe gave the idea of establishing a public bank a shot. But a task force set up by City Hall has determined that startup costs, and “daunting legal and regulatory obstacles” would be too much to overcome.

“If limited to the city of Santa Fe’s financial assets, the possible benefits that a public bank might generate are at best marginal and at worst would carry risk of non-viability because of the relatively small scale of the city’s financial means,” reads a key task force conclusion.

Not to be too harsh here, but the idea that Santa Fe wasn’t big enough to pull off a public bank by itself seemed fairly obvious from the beginning, even to those of us who barely know how to keep enough in a checking account to cover debit card charges.

Former Mayor Javier Gonzales and supporters, in the wake of the financial disasters that caused the Great Recession, made good arguments for cutting out the middleman when it comes to investing city money and making sure it’s used locally instead of being part of the portfolio of big banks whose goals and investment strategies might not match Santa Fe’s. A public bank, it was said, would also be more likely to support and finance local small businesses and community projects.

And then there’s the scandal that has engulfed Wells Fargo – the city’s bank for years now – over fraudulently sticking it to its own customers by signing them up for accounts and financial services they never agreed to. There was support on the City Council for dumping Wells Fargo when the banking contract came up for renewal last year, but the megabank with the sullied reputation was the only bidder with the wherewithal to handle the city’s money.

The push for a public bank in Santa Fe was impressive. A community group, Banking on New Mexico, established a website that is better than most newspapers’ to promote the idea and provide information. A symposium with international representation was held in 2014.

The website includes endorsements from many Santa Feans, including one who became mayor in March.

“Santa Fe and New Mexico are in serious trouble – losing jobs, losing opportunities, losing people, losing opportunities for a better future,” says the endorsement statement from Alan Webber.

“It’s the kind of crisis that reminds me of 1932, when Franklin Roosevelt stepped into the White House in a time of dire national economic danger and began to try things, to experiment, to think differently. That’s what we need to do! We need to have the courage to try a public bank for Santa Fe, to support our own small and medium-size businesses, to jump start jobs and economic activity in our own community. Doing nothing is not an option. Working together is the way to find our way forward.”

A public bank may seem like a radical idea. But Exhibit A for advocates for public banking comes from the non-radical upper Midwest – the Bank of North Dakota, started in 1919 and still the country’s only public bank.

The Bank of North Dakota describes itself as working with private financial institutions, not as a competitor. It does makes cheap loans to students, farmers, businesses and home-buyers. As of 2017, the Bank of North Dakota had assets of $7 billion with net earnings of $145 million. Over a decade through 2014, it returned $300 million to North Dakota’s general fund.

The city also heard from an expert from Germany, who described how small, public, community banks have long been part of the country with Europe’s largest economy.

Local bankers – remember, Santa Fe already has hometown community banks that are viable alternatives to the national giants – question what problems a public bank would solve. Would a Santa Fe public bank, responsible for stewardship of public money, really take on more risk for small loans than local community banks already do?

And New Mexico has agencies – like the New Mexico Finance Authority and the state Mortgage Finance Authority – that plug financing gaps for public projects. Santa Fe borrowed from the Finance Authority when it purchased the campus of the former College of Santa Fe in 2009.

In any case, the city task force is now recommending that Santa Fe be part of an effort to establish a public Bank of New Mexico. “We believe this more appropriate statewide scale would justify work needed to amend the current legal and regulatory restrictions,” the task force report says.

City Councilor Renee Villareal, who helped lead the effort to study public banking, said she remained encouraged. “I’m not forgetting about the public bank effort,” she said.

Getting serious consideration of a state public bank at the Roundhouse won’t be easy, nor should it be. It’s the kind of idea that would need years of careful study of costs and benefits. Also, any public bank proposal has to include an absolute firewall to protect against the kinds of political shenanigans that New Mexico has seen too much of.

But creating a public Bank of New Mexico is not something that should be dismissed out of hand. New Mexico could use something like that $30 million or so a year that the North Dakota bank returned to the general fund.