Pub. 15 2018 Issue 3

6 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 According to the American Bankers Association, there are 40 credit unions chartered in New Mexico with assets of approximately $10.6 billion. Despite their significant assets, they do not contribute to the local and federal government through the form of corporate income taxes given their “not- for-profit” status. In comparison, last year the nearly 40 banks chartered in New Mexico, with combined assets of approximately $13.3 bil - lion, paid $28.4 million in taxes. This contributed significant - ly to the vital tax base needed to support critical services such as first responders and education, along with infrastructure maintenance and improvements. If credit unions intend to dive deeper into business lending and recruit unlimited members – actions their tax exemption status was structured to limit – then perhaps the exemption itself should be reconsidered in order to level the playing field. Public Banks A public bank is a financial institution owned by the gov - ernment, funded with taxpayer money and directly account - able to elected officials and civil servants. There’s only one public bank in the United States: The Bank of North Dakota. Though, there is a growing movement for more public banking options across the country. The city of Los Angeles and the state New Jersey have been seriously considering the option in order to ensure money stays in the local economy instead of contributing to the portfolio of larger banks. Even our state capital, Santa Fe, joined the chorus when in 2013 Santa Fe be - came the smallest city in the country to launch a public bank feasibility study. The Bank of North Dakota was founded in 1919 out of economic uncertainty and a lack of banking alternatives in the state. The farmers of North Dakota were concerned that large grain traders and established out-of-state banks threatened their sovereignty. In order to protect themselves against the high interest rates that put their farms at risk, the farmers formed the Non-Partisan League that eventually gained con - trol of the governor’s office and led to the establishment of the first public bank in the nation. The aftermath of the Great Recession led to increased public discourse about the causes and effects of the financial crisis. As a result, in 2017, the city of Santa Fe established a task force to study the pros and cons of charting a public bank. After considerable consultation with various banking and legal resources, the city finance staff, regulatory officials and the public task force determined that “the current legal and regulatory requirements are not conducive to the creation of a state-chartered public bank.” The final task force report notes, specifically, “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-via - bility because of the relatively small scale of the city’s financial means, especially when weighed against the considerable costs of creating the bank.” As this conversation continues to evolve locally and na - tion-wide, it is important to remember the impact community banks have on sustaining communities. In 1919, the farmers of North Dakota had very limited options to secure financing. Today, community banks are present throughout the country and operate with established charters and an understanding of the changing regulatory environment. Community banks serve local customers, businesses and families, contribute to the local tax base and help facilitate the development of infrastructure and public services necessary to keep local economies strong. Summary Competition in the financial services industry is always changing. As bankers, we need to be mindful of this shifting landscape and insist on an equal playing field to ensure that all participants, whether it is fintech, credit unions, com - munity banks or public banks, are subject to the same rules and regulations. Standards should be based on the risk and complexity of the financial services being offered. To allow anything less could lead to repeating failures of the past. I applaud the steps the OCC has taken to regulate fintech. Without regulation, how else can we ensure consistent deliv - ery of financial services? If this regulatory rigor were applied to all financial institutions, perhaps we could have avoided the Great Recession of 2008. Today, why should fintech, public banks and credit unions be exempt from consolidated regula - tory standards? n n President’s Message continued from page 5