Public Banking in the Press: Public bank advocates gain advice from experts – A Report from the Banking On New Mexico Symposium

The following article, from the Santa Fe New Mexican, is a report from the Banking on New Mexico Symposium: Funding Local, Sustainable Economies held in Santa Fe on September 27, 2014. The format of Banking on Colorado: Bringing Our Money Home Conference, to be convened on January 31, 2015 is very similar to the Santa Fe symposium, with some of the same nationally know speakers.

From The Santa Fe New Mexican:

Public bank advocates gain advice from experts

Posted: Saturday, September 27, 2014 10:00 pm | Updated: 11:18 pm, Sat Sep 27, 2014.

By Ed Moreno
For The New Mexican

The path to establish a publicly owned bank will be scattered with legal and political obstacles, but scores of citizens, public officials and public finance experts gathered in Santa Fe on Saturday to make the case that it can, and should, be done.

The spirited gathering, organized by “We Are People Here,” brought local, national and international perspectives on why it is necessary to try to establish publicly owned and operated banks that serve local communities, and not the “plutocracy” that controls the nation’s wealth, the event’s organizer said.

“We are gathered here because we recognize to the degree greater than in any time in the last 40 years that we are on our own,” said Craig Barnes, the founder of the organization. He cited the concentration of wealth and power and said “the life’s blood is being sucked away from our local communities.”

“We’re not here to blame, we’re not here to complain. We’re here to get up off our knees, because it’s in our nature as Americans to be on our feet,” he said.

Santa Fe Mayor Javier Gonzales has thrown his support behind the effort, while repeatedly reminding Santa Feans that the effort will take a lot of time to achieve its goal. The city has issued a request for qualifications for entities to assist the city in its deliberations on the establishment of a city bank.

“My own family business, KSWV, ‘Que Suave’ radio, has been for years trying to expand and purchase new equipment and improve our signal,” Gonzales said. “So what’s out there now isn’t working. I believe we have to get creative about financial solutions, and the public bank is a big piece in that conversation, and which is why we are here today.”

State Rep. Brian Egolf said he was inspired to introduce the first public bank bill in 2010, while watching a Christmas-themed video of a congressional hearing on big-bank practices, interspersed with scenes of It’s a Wonderful Life, the Christmas classic movie, in which George Bailey’s friends save his business. The video culminated in a question: “Whose side do you want to be on, George Bailey or Mr. Potter?”

George Bailey kept the bank, but Egolf’s bill did not pass in the following legislative session. Regulations were later adopted, however, to allow about $1.5 billion of state funds to be used for community projects in the state. He added that New Mexico’s permanent funds are the third largest in the world.

The symposium brought national experts to discuss various forms of public banking, to share experiences in Pennsylvania, Vermont, and the only state in the U.S. with a state-operated bank, North Dakota. The panel also included the director of the German Savings Banks Association, which has operated public banks for more than two centuries.

A state-operated bank is one that has a designated funding stream to be deposited into the bank. The funds are loaned out for specified purposes, depending on how the law creating the bank is written. Because each state is unique, with unique constitutions and laws, it would be difficult to simply import another state’s public bank.

The Bank of North Dakota, the only state bank with a public purpose, was created in 1919 and has been using its funds to support local and statewide needs. It operates more like a central bank, supporting commercial banks with partnerships and other activities.

In New Mexico, the situation is mixed, as it is in most states, and each state has to find its own best path, said Gwendolyn Hallsmith, the executive director of the Public Banking Institute. She has been working to establish a state bank in her home state of Vermont.

David Buchholtz, a leading finance attorney based in Albuquerque, who is serving as pro-bono counsel to We Are People Here, outlined some of the steps that would be most effective in New Mexico:

“Developing good policy, identifying legal issues [that] will arise … identify solutions and bring those issues that might be acceptable under the law, but then ultimately have elected officials look to the attorney general to say, here are some questions, and [we] would like your consideration for these issues.”

Buchholtz said he is confident that there are enough elected officials in New Mexico — the only people who can request an attorney general’s opinion — who would be interested in seeking an opinion on the issue.

“There is not enough in the legislative, judicial, constitutional experience for any good lawyer to say with confidence, ‘Let’s just do this,’ ” he said. “But I think there is enough for good lawyers to say, ‘here are the strengths of these arguments; can we get some sense from the government’s lawyers.’ ”

Buchholtz said he has not identified any significant roadblocks to establishment of a public bank, and others noted that New Mexico has at least one logical vehicle for the establishment of a state-bank prototype through the New Mexico Finance Authority. Another potential would be through the use of the state’s permanent funds.

The Finance Authority operates the public project revolving fund in the state’s accounts. It receives money from borrowing through bonds, the portion of the Governmental Gross Receipts Tax, which is paid on such items as the tax levied on a water bill, and returns of funds that were previously loaned.

While the possibility of a public bank exists for the state, Buchholtz said it would be harder for a municipality to start up a city-owned bank, because of the need to enact or divert a funding source to provide initial capital to operate the bank.

The event ended with a post-dinner musical satire, a keynote address by Richard Wolff, professor of economics emeritus at University of Massachusetts, Amherst, and a call to action to address money, credit and sustainability by Ellen Brown, founder of the Public Banking Institute.

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