Questions raised about Santa Fe public bank

By T. S. Last / Journal Staff Writer | The Albuquerque Journal | November 21, 2017

SANTA FE – One thing was clear from a public forum held by the city of Santa Fe’s Public Bank Task Force, formed to research and identify barriers to forming a public bank: It won’t be easy.

On Monday, the task force presented findings so far made by four subcommittees addressing legal issues, regulations, capitalization and governance of a proposed public bank, then heard comments and questions from about a dozen of the 40 or so people present. Several of them expressed doubts about the viability of a public bank – a bank owned, operated and funded by a government entity.

While the subcommittees laid out many of the challenges the city would face if it were to form a public bank, one in which the city, at least initially, would be the only client, some skeptics in the audience raised other concerns.

Citing a recent audit that showed the city was susceptible to fraud and theft and an audit in 2015 that determined $2 million of a $30 million parks bond was misspent, Berl Brechner said the city should abandon the idea altogether.

“This process has gone farther than it should have,” he said.

A city-financed feasibility study done last year determined that a public bank could potentially improve fiscal management, create a healthier local lending climate and generate better interest rate margins for the city. Earlier this year, the City Council passed a resolution to form the task force to assist the council in making an informed decision about the city applying for a bank charter through the state.

But it’s not clear whether that’s even possible. As the regulatory subcommittee observed, there’s uncertainty over whether the bank would violate the state’s anti-donation clause, which prohibits a government from lending its credit. That committee also noted that the FDIC had concerns about issuing deposit insurance to a domestic governmental unit.

While the committee did not respond to Brechner’s comment, the next speaker did.

Charles Koenig said the Bank of North Dakota, one of the few public banks in America, has turned a profit every year since in was formed in 1919. And the profits didn’t go bankers or anyone on Wall Street, he said.

“If we can establish a public bank in Santa Fe, we can generate profits for the city,” he said.

The task force will present its findings to the Finance Committee on Dec. 4. A final report will be submitted to the City Council early next year.

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