Pub. 17 2020 Issue 4

Issue 4 • 2020 5 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S January 19th. Due to the pandemic, the capitol is closed to the public and lobbyists. Only legislators, staff and some media are allowed in the capitol for the most part-committee hearings and floor sessions are conducted on a virtual basis. In normal circumstances, our lobbyists would be roaming the hallways of the capitol protecting our interests. But with the capitol closed, that is not happening. My fear is that with- out all parties and stakeholders in conversation that major legislation will not be properly developed or vetted and many new laws will be passed to the detriment of our State and our industry. The session ends on Saturday, March 20. Although there are many controversial issues being de- bated, those that are most pertinent to the banking industry include changes to our liquor laws, new laws to limit or all out ban the extraction of fossil fuels, and the proposed creation of a public or state bank. I will focus on only the public bank issue in this article given limited space. Legislation pertaining to the creation of a public bank are SB 313 (Steinborn-Las Cruces) and HB 236 (Roybal Caballe - ro-Albuquerque), which call for the charter of the Public Bank of New Mexico. The NMBA is adamantly opposed to a public bank as we believe it is unnecessary and would provide no benefit to New Mexico residents or businesses. The implica - tions of creating a public bank pose enormous risks to New Mexico’s taxpayers and would saddle the State with significant risks, and unwarranted costs to replicate a highly competitive, regulated and federally-insured banking system that already exists in our communities. In addition, it will eradicate hun - dreds of millions of dollars out of our local communities that are currently being utilized for urgent needs such as health and safety, infrastructure, community development and job creation and instead centralizing those funds in Santa Fe. Other reasons for the NMBA’s opposition of this legislation are as follows: • There is currently only one public bank operating in the U.S., The Bank of North Dakota. The Bank of North Da- kota was chartered in 1919 to address circumstances that no longer exist in that state or anywhere else. Because it was created nearly 100 years ago, the Bank of North Da- kota existed before most banks in that state were created. It provides banking services to businesses and consumers directly and serves as a bankers’ bank for other banks in the state. • Banks are either regulated by the State of New Mexico and the Federal Deposit Insurance Corporation (FDIC), or they are regulated at the federal level by the Office of the Comptroller of the Currency (OCC). Deposits in these in - stitutions are all insured by the FDIC up to $250,000 per depositor per account. There would be no FDIC insurance for deposits in the State Bank, nor would the State Bank be subject to extensive federal regulations and examina - tion oversight, which are necessary for protecting deposi- tors and preserving the safety and soundness of the bank. • New Mexico banks currently pay interest for these public funds and pledge collateral in the form of securities. This may not be true for a public bank. • There is a significant potential of lending and other bank - ing decisions being affected by political influence, agendas and pet projects rather than adhering strictly economic feasibility and sound lending practices. • Political appointees only will provide oversight of the public bank, including the hiring of employees, creating an even greater political influence on any decisions made on behalf of the public bank. • A state bank most likely violates the New Mexico Con - stitution “Anti-Donation Clause” and would potentially require an amendment to the constitution. • A public bank could potentially impact the State’s credit risk rating causing public borrowing to become much more expensive. The NMBA will continue to follow these bills closely and voice our concerns. After the session ends and the Governor has had time to sort through those bills that reach her desk, we will provide you a list of victories and, hopefully, no defeats. As our EVP John Anderson told me, “Success come to those who make things happen, not to those who let things happen.” n Our industry’s biggest success story of the past year has been the execution of the Paycheck Protection Program (PPP). Despite the haphazard way this program was implemented by the Federal Government, New Mexico bankers worked tirelessly to ensure our customers received the assistance they desperately deserved and needed at the time they needed it the most.