Industry sign banking new mexico memorandum of understanding later
all right well our next speaker is Nicole lichen from Santa Fe Nicole is a veteran organizer for economic justice and for environmental and civil rights and adoption social worker by profession in 2011 she co-founded we are people here and some of you may know Craig what's his last name Craig Barnes who was Richard from Colorado and played a major role in getting public banking going and other financial progress in New Mexico but Nicole was a co-founder of we are people here and banking on New Mexico which lead the movement for public banking in New Mexico and Santa Fe and Santa Fe has been the farthest along in its efforts to get a public bank in the country and that included an international banking public banking symposium in Santa Fe in 2014 she leads the effort for a Santa Fe public bank and his a board member of the public banking Institute so let's welcome to Coe [Applause] thank you who was the economy of scale guy yeah good okay and I'm going to speak on that tonight how we the our core organization we are people here comes from a quote of Jose Rizal in the cry for Philippine Independence and dignity and it's where people here we deserve to be treated with respect and in Santa Fe we've been actually how we came to this was as a large Craig was giving lectures in a bookstore for about a dozen a dozen weeks and afterwards we all organized into groups action groups learning groups art groups all dedicated to finding the root of plutocracy and what was the most effective way to intervene to return democracy and equality and dignity to all people and we had huge meetings for months where we all sat around and asked each other what's the root you know what's the single most important place that if we all put our weight behind it we could make a difference for democracy and a fair economy and someone say its term limits or it's money out of politics or it's a guaranteed annual income or it's some kind of fair housing and and food and Craig went away to his cabin in Colorado as he did every August and spent a month there on retreat and he came back and said guess what it's the banks and I don't hurt cuz I don't even balance my checkbook I'm a social worker by profession I just let them win unless it's really bad but I also knew that it was true what he said and when and if you understand that that's also true that you can be inspired to learn and do things that you never thought you could on behalf of equality and dignity and opportunity and respect for all people so in 2000 2011 it was founded then in 2012 someone emailed me and said well what about the Bank of North Dakota and I thought what is that and he said well that's a public bank and I said well what is that and then I looked it up and I thought wow that's really neat and so I I think in like November October of 2012 I did a presentation on the similarities between New Mexico and North Dakota and let's see culturally North Dakotans were settled by Norwegians just like New Mexico is primarily Hispanic and Native people in culture but what they have in common is the value for family and community and working together and however it kind of ended there I mean well the other thing is that they're largely a rural state they have a few big urban areas and then the rest of their economy is farming and ranching maybe mining and oil and gas and that's New Mexico too and that's a lot of Denver ours a lot of Colorado as well and probably a lot of the Southwest but there the difference ended and a lot of it has to do with Bank of North Dakota there economy is thriving and their small businesses have access to loans and the Bank of North Dakota targets lending to benefit the public as a whole they have a loan program for farmers to help them when crops fail or when water doesn't come they make affordable loans for housing and barns and farm equipment and in North Dakota they have the highest per capita percentage of community banks of any state in the nation and that's because they work with local community banks to support them by doing what they call partnership lending issuing lines of credit lower interest extending it to the banks and then people have access to higher levels of credit than they would have if those banks didn't have the Bank of North Dakota to back them they have a high standard of living and they have a good educational system in New Mexico in regards to our educational system we say thank goodness for Mississippi we are right at the bottom in spite of the fact that we have a 19 and a half billion dollar Permanent Fund that is substantially dedicated to education in our state but all we're allowed to spend is the interest that they learn that they earn from investing it in private investors and an investment firms and there is a huge fight in our legislature every year you can't touch the principal you can't touch the principal we also have revolving loan funds and you you know you can't touch the principal on that as well North Dakota as you heard has student loans it's and they issue low-interest student loans they refinance student and their young people stay in their state because there's jobs and there's careers and they get their education there at an affordable price so that they're not strapped for life so anyhow so I just you know those were some of the differences that I noticed right off and I thought well that's really cool let's organize a state bank for the state of New Mexico and then I remembered my legislative experiences I've been in the legislature a lot on a number of pieces of legislation and it's not like they say it is in the rule books I can tell you and so I think I heard about San Francisco and that San Francisco was going to do a municipal public bank I thought wow we should try that if we could figure out how to do a chartered public bank and do it within the existing laws somehow I don't know if we can but if we could do it within the existing laws and not change anything then maybe that could bring that difference to Santa Fe now Santa Fe has I think 83,000 people that's our population Denver's like what so yeah so it's like that's economy of scale that you're talking here so we knew it was it was small but there's advantages to being small it's easier to getting things done people can listen to each other easier so we decided to pursue that Craig I Elena and the people and we are people here and we founded the name banking on New Mexico but after we thought about the state bank then and moved to a public Municipal Bank it was really because of that economy of scale that it would be easier to get things done if we could do it within the existing laws and statutes but Santa Fe is a lot smaller than Denver and most of the communities that are doing it so we went in 2013 to San Rafael and went to the public banking Institute conference there it was a three-day thing and it was fabulous and there was a lot of technical information and we got all fired up and we came back and we did education and the following year we had our own symposium before that the mayor invited councilors and city staff and opinion leaders in Santa Fe to come to a three-hour presentation by the public banking Institute chair and members and and then we had the three days symposium educational symposium and then that was in September that in November the City Council approved a funding a task feasibility study they only funded fifty thousand dollars which is really small but it so they did that and it was in March that finally the contract got signed and then the feasibility study was completed by the end of November I think and so the feasibility study you have to want this I'm going to share with you things I've learned one thing is you have to watch out who pays for things because sometimes you get what you get what they pay for and in this case it was the economic development department of the city of Santa Fe's so our feasibility study was primarily an economic development study it and it is very helpful for submitting an application for a bank charter to know what the financial terrain of your community is where the deficiencies are what a niche is for a public bank but it hardly addressed a public bank operations at but it did find it focused primarily on the internal management of the city's finances which were terrible at that time we had huge cash we are a lot of cash reserves for a little town they were invested poorly if at all I think they were mostly sitting and checking accounts and so they made a bunch of recommendations about improving the cash management system and as a result of that the city hired a treasurer and they hired an investment advisor and they provided and they also hired someone who is a professional finance director for our city so things all those things got implemented over the next two years but the report did say that a city owned bank could save the city a lot of money and it could keep money circulating locally by making investments that benefit the community as a whole it recommended a three phase approach the first was get your own house in order before you take on a public bank that makes you a credible applicant that's smart I don't remember what the second phase was but it wasn't very much and then the third phase was three years later which would be about where we are right now in time and that was to actually apply for a bank Charter and that has not happened the feasibility is study did not address the five year business plan which is part of applying for a bank charter it didn't address legal questions it didn't address regulatory questions it didn't address mission or purpose for the bank it just kind of was a financial model that said you could save this amount of money if you had a public bank and they also called the city's financial management a public bank which I really didn't like very much because it didn't have that independence so so it looked at and it was over a seven-year plan and it showed that the city could save twenty four point six million dollars if they had a public bank but some of that was good internal financial management and they used the same model that I'm part of a team called the brass tacks team it's the nerd team I'm not really a nerd but I can translate nerd and that's really important and so the brasstacks team is an ad hoc group of people who like to noodle numbers and are interested in banking and interested in city government and finance and all those kinds of things and so we kind of suspected from speaking with the person that was doing the feasibility study that not much was going to be addressed in terms of a public bank so we did our own study and we looked at what the issue was the biggest for the city at that time and it was debt right around that time we realized number one the economic crisis hit New Mexico later like four or five years later but when it hit it hit really hard and it coincided with excessive bond debt so the interest the income that we were earning on our grocery seats and our taxes just went down down down however our bond debt was up really high it didn't go away and we couldn't pay it so we were really in a very bad situation but anyhow so our brasstacks team said well what if we took the city's debt and we used it to set up a public bank and we refinanced the city's debt at lower interest and and you know fooled around with the rate and the time periods and whatever and so this is what we found in our five-year model which is not a perfect model but it's you know it's pretty good we took the same ten million dollars to invest in a day plus the deposits the city had at the time which was about two hundred and twenty million and we refinanced over a five-year period eighty three million dollars in bond debt and we did it at four percent interest which was lower than what the city was paying at that time well we saved the city one point four million dollars in debt service and we reduced their total debt by four point eight million and the bank made a profit over that five-year period of ten and a half million dollars how much did we invest in the bank do you remember yeah so they got it back in five years right so they could have paid that back or they could have taken that ten million dollars and used it to help invest in solar or affordable housing or financing more of the city's debt because the debt goes out year after year after year bonded it gets extended typically there 15 years to 30 years cycles so when you're stuck you're stuck over a long period of time for project so we learned that a public bank can earn a profit it can save the city money and it can do it in one year I don't know what Denver's debt is or how they do it but that's something you could do we also learned that if it's not an official report paid for the city that nobody listens very much where they quickly dismiss it but officials elsewhere listed listen to it and they've been picking up the idea and they've realized gosh we could refinance some of our own debt so in June through October this is public knowledge so I don't think I'm sharing anything out of school the city of Santa Fe experienced some of that very serious problem I was telling you about with having too much debt and not enough income coming in it's something a lot of us have to deal with debt can be really can really strangle you and so what happened in our city was that we had to cut our budget by a third in one year and we had to cut our staff by a third and then the following year we had to cut that budget by a third so you can imagine what the tenor was in Santa Fe during those two years were just kind of coming to the end of that now and because we had all this debt we owed private investors that we couldn't pay the new financial management team that the city hired took our spare cash and paid it off so what happens when you take your money and you pay something off do you have it anymore no so that made it harder to start a public thing right because we we didn't have I mean we had they spent sixty million dollars paying down Vonn debt and getting out of trouble with the IRS and a you know a bunch of they mismanaged some bond funds because they were desperate they took bond funds that were designated for a specific purpose for Parks and Recreation and they spent it for employee salaries so they wouldn't have to let employees go but then they got on it and that was a no-no and a bad thing to do in the IRS said well we're gonna find you 13 million dollars unless you can make this right so so that you know they didn't have to pay that 13 million they just had to pay up all their bond debt because well actually they couldn't borrow anything because their credit was bad or getting going to be bad very soon and they had a lot of projects lined up off into the future now in a city like Denver that can happen here too but it's you've hopefully you've got more cushion Albuquerque did it I know the county of Bernalillo got themselves and did the same kind of trouble Albuquerque is a pretty big city so because of that the feasibility study that didn't tell us how to set up a public bank the steps the legal the regulatory the business plan and all of that there was obviously no money to do that right and ours and our city councilors and our city staff and the people were all worried about what to do and how to go forward and and me being on the brasstacks team thought well we've got to find a way to keep this going forward somehow so what can we do so we wrote a resolution and we did it I think in April or May and and it was to set up a volunteer task force of experts bankers lawyers financial people people from the community and then we listed all the things that hadn't been done in the original feasibility study and asked if they would look at that well because our city was still struggling so much it didn't get on the agenda for quite a while it didn't get approved really until May of this year and so the task force began meeting in August and they've been meeting for six months now and they're in the stage of the final report that they're going to write regarding it and so let's see oh there's another little thing I wanted to put in there the mayor who was our primary advocate decided to do something else for his legacy and he deci
ed to do a revolving loan fund called the Verde a fund and we just were kind of left high and dry but that was kind of a gift and I recommended to you that it you're really much stronger if you have the support of the full City Council which was what we did when we got our resolution passed every single councilor stood strongly in support of it to have a task force and I would suggest that would be good now another strategic thing that happened with us in Santa Fe was that our beloved Craig Barnes died of cancer kind of right in the middle of our campaign and any of you who knew Craig knew that he was a statesman he was a diplomat he was a civil rights attorney here that ended segregation and Colorado many of you don't know that with his landmark action but he died in November of 2016 and it affected our hearts it affected our energy and he was our most credible speaker and he had the most influence so the rest of us were left to kind of carry on after he died and we were not one-tenth the sexy as Craig was or articulate so so that was another thing that happened and stuff will happen but you know you just have to keep going that's the thing you just keep going you just figure out what is it you can do with what you've got how can you keep the conversation going how can you keep moving so one of the things that happened when we wrote our resolution to enable a task force to study in public banquets that we listed the finance department our representative from the finance department of the CFA as an ex officio member which meant that he would they would be available but they wouldn't be a regular voting participant but when it went to see council the process before it got introduced they became actual members well the finance department did not support the idea of a public bank and so at every task force meeting what the task force heard is it's not necessary we can do it just as well just as cheaply you don't need a public bank and that had a very demoralizing factor so who's on the task force it matters a lot we had to stated that but we weren't able to stop it from happening one of the things that happened that you should know about is that the city of San Fay paid for a very respected law firm to do a memorandum on the legal aspects of a public bank looking at Bank depository law city and state law and every thing and it's a really good memorandum and what it says is there is no unsurmountable obstacle was setting up a public bank you know it says that pretty clearly and that was done by virtue of Najjar and if you're interested you can find it under resources on the public banking Institute website it should be helpful for you in Colorado the laws are generally a lot the same from state to state there's only some parts that are different so challenges that a public bank runs into is that banking law and regulations for the last 100 years have been established with privately owned banks with private investors they don't really have the model for a public public ownership of a bank and there's some a lot of technical little things that have to be wiggled around or through or changed the requirement of FDIC membership is most of us involved with public banking thing is pretty silly and that's because FDIC insurance only insures up to two hundred and fifty thousand dollars and there's only one positive or maybe two or three depositors in a public bank that would be the C or the C and they're depositing way more than $250,000 and so that's another obstacle and then acceptance by the Federal Reserve and then the state depository and investment laws from innocent in states they're you know getting getting some flexibility with them one thing that is great is that we have a state treasurer who's a very strong supporter of a public bank and is interested in having a state bank to fund infrastructure and facilities and facilities and we didn't introduce at this session because in New Mexico we have a 30-day session and a 60-day session and we just needed more time to prepare so I can I went to the task force meeting Wednesday night in Santa Fe and they were doing a group edit of the final report and I have the report here for you it's not finalized yet because they only got halfway through the report but there they made three recommendations one that due to legal issues up and all the challenges that the scale of Santa Fe and the challenges they've got right now they're not able to work their way through the regulatory and legal process it would just be too costly for a city that doesn't have the money right now anyhow another thing was that they they did support the see supporting a state public link they didn't describe what that would look like and to my way of knowing there's at least five different models a state bank could take and they also recommended which was off-task and I objected to it they recommend the city look at ways to improve the local economy by working with existing private and non-profit funding sources I mean that's a good idea but it just wasn't in the resolution so I would make these recommendations if you decide to do your own task force rather than starting with legal and technical issues I would suggest that you talk you identify what the unmet needs are in your community that are not being mapped by existing private and nonprofit and governmental funding sources and then identify the need which is your each for developing a five-year business model for a public bank and and then you also need to come to agreement on what a public bank is that came up at our last meeting a public bank is a bank that's owned by a government that doesn't give you very much information and our task force really struggled with that what did it mean would we be the spark us and model like in Germany where private investors and public investors all put their money in together for the public good or would it be an infrastructure and infrastructure or would it be a partnership model like the Bank of North Dakota you know would it accept cannabis deposits we have we have cannabis in New Mexico too although it's not recreational so another thing is that as a challenge in a small community although we had some really good people on our desk force we only had eight people and I think San Francisco has like about 20 people on their task force and that's maybe a good idea because you get more diversity of opinions but the thing is the experts we had were like bankers who make you know with private investors and we had regulators that were used to working with private chartered banks and their regulations and we had people that didn't really know that much about the benefits of a public bank or how it worked they didn't know the technical stuff we had two lawyers that didn't know that much about banks or banking we had one lawyer that really knew his stuff but he was a facilitator and he tried to stay neutral so maybe if you have more and with a bigger city you have an opportunity to get more voices in for what a public bank could be what its vision its purpose could be because what happened with our task forces they jumped into all the nuts and bolts which is what we recommended that they do that was our mistake and then they so what they ran into were challenges and they didn't have the vision or the purpose for why a public bank was so important so that would be one thing I would recommend to you and they didn't understand that they didn't understand the idea of legacy that a public bank can do for your community it's not something that just solves a problem right now it's something that can just change life forever in the communities that make that commitment and fight to set it up keep in mind that it's an it's a new idea it takes time to reach out to people you need people with good credibility in your community who can really speak to it you need the Nerds who can do the noodling of the numbers and also a lot can happen way in your process but the important thing is to keep going that's that's my message for you [Applause] you want to take a few questions yes we do have something this is kind of nicest soft rug here and like it it's like one of those that you put by the bathtub with the sink [Music] [Music] absolutely however the bank that we were proposing in Santa Fe was the size of a hamster smaller actually than most of the community banks that are in the city actually we only have one state chartered bank and Santa Fe anymore but if you're looking at a city like Denver where you have a lot more capacity then you really can partner like the Bank of North Dakota does to help give them credit so that they can extend credit at more affordable rates you can do risk sharing and and credit sharing [Applause] he was behind the banking how ard that he was making a golfing buddy it'd be getting the poor people off is back for their backs I don't know their vested interests they're the ones that profit off the people as Craig used to say can you hear that big sucking sound you know our lifeblood is just being siphoned away it's a form of debt debt enslavement it's a new form of slavery the you know it was exasperating it was good and it was exasperating you're talking about the task force right they were not required to involve the public in any of their hearings but they were open hearings and so they every three weeks which is pretty amazing from August on and they would meet and they went to research and between meetings they had a regulatory subcommittee they had a capitalization subcommittee they had a governance subcommittee and one other and I can't remember what it was but they would come and they would report and then at the end they would give the audience five minutes to make comments which was good and then we had one public hearing where all the bankers showed up and objected strenuously and and the public showed up and was in support of it and then when the final report comes and and they also had a hearing in front of the Finance Committee but the public was not allowed to comment that was just a presentation and then they're going to have another public hearing where the public will be able to comment after the report that will be at the end of their final report well I'm on the board of the public banking Institute and so I got a lot of informal help and I'm good friends with Ella and then I'd say what do you think about this and she'd say well well this and and and then on our breasts and then on our but the thing is that what happens often is a lot of these committees and reports and whatever they happen behind closed doors and then they give you their results and then you get to comment after them there are teams that are being assembled now who really are genuine experts that are submitting proposals to cities and towns and states when they do requests for information or requests for proposals and everything the whole ante has been stepped up in terms of expertise but yes expertise is needed I on our brasstacks team we had a man who was just very interested in financing and banking he was really interested in it and then we had a woman who used to do HUD financing and she learned how to do creative low-interest financing and qualifying and things like that so she did a lot of the economic modeling and he did the banker piece and then we had another person on our task force who attended every city meeting that ever was and knew everything that was happening good or bad with the city and that was very helpful [Music] [Music] depends on how expensive the house is and how big the mortgage payments are and how much you could bake well you can do short-term I don't know the I mean I don't see why it couldn't be done you know it just they liked it a lot better if they double their profit [Music] [Music] politicians do all the niceties but it's pretty apparent to me at least the majority of that are just for corrupting and there's five of the nice things that they say they do the nice new smile that what sense did you get were terms of the percentage of people who deal in religion and interested in this and how I perceive you're just in a blown smoke you know so it seems like me to deal with reality the situation because we go through these processes for people dealing with their system and she mentioned assassination assassination and that's also apply to palatable works and we're not being honest with ourselves our communities we're dealing with and that these some of the you said went to all of the regulatory processes and how those are actually written in order to prevent things like this from occurring there's a whole community rights network which deals with these issues what are your thoughts on magnitudes of your process that he went through that how much of it was just yes how much of it was you know people really care well I mean you need to understand that baking laws and regulations were written for banks that were managed for private investors and that's how it's been for a hundred years and that's not an accident that those are the kind of banks that we have we used to have public banks and the private investor bags really ran them off they made some mistakes I'm sure the public banks made mistakes there were counterfeiting problems and other things that happened along the way but mostly it was pressure from the private for-profit banks that really put the Kayode the the public banks and so I can tell you that our city councilors were very sincerely interested in it and I think they're going to be disappointed to hear the results of the task force I hope to keep engaging them and but and as far as like the regulations and licensing I couldn't you know they issued a memo that was so inaccurate and I don't know if it was intentional or just lack of legal knowledge in those areas so I couldn't say but I do and who else would you be thinking of well a lot of the politicians I've seen it with city councils where you know people are just you know they're not their heads I would have a button today they don't really care you know it just seems like that word or Thor they'll be pragmatic they you know they say well yeah it might be pragmatic or they might have a lot of other battles it might be that we need to really lift their vision up I mean it's just happening on every level it's happening on every level but it's getting paid for by the financial services industry [Applause] you
