Keeping the Money at Home: Thoughts on A Public Bank for New Mexico

By Susannah Abbey

Q&A with Sarah Manning: Sarah Manning is a coordinator of outreach and public partnerships for the Alliance for Local Economic Prosperity (AFLEP), a nonprofit organization that educates and advocates for improving economic prosperity in New Mexico. The organization prepared a bill last regular session to establish a public bank and is ready with a new version for introduction during the 30-day legislative session that begins in January.

What is a public bank?

A public bank is a state-chartered bank that partners with local financial institutions to address local needs. A public bank is owned by the people through their representative government: a Tribe, City, County, State or Federal Government. It can receive deposits of public funds (taxes, fee, fines, and interest earned) from and make loans to the government entity that owns it and other governmental entities. A public bank for New Mexico can be founded and owned by the State of New Mexico, to hold in trust for the people of New Mexico. A portion of its profits can be returned to the governing unit that owns it, to be used for public purposes with additional interest revenue retained to grow the bank. There are no “private” stockholders reaping the bank’s profits as stock dividends. AFLEP’s research concludes that a public bank can be an effective tool to revitalize our New Mexico local economy. 

What is the relationship between a public bank and The New Mexico Finance Authority? What can a public bank offer that the NMFA can’t?

The magic of a bank is that it is the only institution in history that creates money when it makes a loan. When you take out a loan, even from a credit card, you are creating money—but the money that you borrow does not exist before you borrow it. A bank can lend its deposits 8 to 10 times. When you use a bank, you increase the flow of money in a community. When you make a grant, you have to have money—it’s not increasing the amount of money available. When the grant is done, it all goes away. The NMFA makes loans and grants that come with strings attached. For example, loans made by the NMFA required year-to-date proof that a business was losing money due to COVID. What do you do if you’ve only been in business 11 ½ months? When a public bank makes a loan, that money recycles back, the deposits increase and the bank can make more loans. There is not a one-time allocation of funds. 

Why hasn’t the push for Public Banking been more successful so far?

Here we have some resistance because it’s a different way of thinking. Conservative-leaning people worry this would be an expansion of government. Community bankers are very much concerned because they assume a public bank will compete with them. Every town, pension fund, library fund, or division of the state needs a checking account, and their banks are community banks—and these community banks worry that there would be a requirement that all divisions of government use the public bank instead. That’s not correct: The public bank cannot make a loan except through a community bank. A public bank would create loan programs in conjunction with community banks. It would allow the community bank to make more loans, either by making deposits into the community bank or by taking on some of the risk and, in some cases, buying loans from the community bank. The Credit Union Association is all in favor of this because they understand it’s much more their model.

What kind of outreach is AFLEP doing?

We are talking to New Mexicans about what they want from their state—doing a series of community conversations across the state.

Looking ahead, as we deal with climate change, the public bank could play a part in supporting innovative ways to manage water in agriculture, and also help fund small infrastructure programs without going through the bonding process. In Chama, the water system failed and it cost $300,000—their budget for the whole year. If the Public Bank had been available to Chama, it could have funded the cost in stages and made a loan directly to the water authority without going through the bonding process.

When the Public Bank is established by law, it will be up to us to suggest loan programs that New Mexicans actually need. By way of example, In at least three communities we’ve spoken with, people want bus service within and between towns, and bus services that don’t serve just the main drag but take people to where they want to go. 

For more information about public banking or AFLEP go to