Originally published at abqjournal.com on February 11, 2025.
A new financial experiment is making its way through the New Mexico Legislature, threatening to destabilize our economy, burden taxpayers, and expand government control over private financial markets.
House Bill 130, which proposes a state-run public bank, is a misguided effort to fix a problem the state itself created. Proponents claim this government-backed bank will solve a credit shortage, but they conveniently ignore that the crisis was manufactured by the state’s own regulatory overreach.
The 2022 passage of House Bill 132 imposed a 36% interest rate cap on consumer loans, driving small-dollar lenders out of New Mexico and leaving vulnerable borrowers with fewer options. Now, instead of acknowledging this failure and restoring a free and competitive lending market, lawmakers are doubling down on bad policy by proposing a state-owned financial institution to fill the void. This is nothing more than a Trojan horse for government overreach, one that will put taxpayers on the hook for risky loans and political favoritism.
Public banking advocates claim this proposal will promote economic fairness and financial inclusion. In reality, it will be a tool for political interference, mismanagement, and inevitable financial collapse. Imagine an institution run by the same bureaucrats who struggle to manage basic public services like road maintenance, education and the Motor Vehicle Division.
Now, they want to oversee banking, an industry that relies on expertise, risk assessment, and accountability — three things government institutions routinely fail to deliver.
A state-run bank means politicians will control credit allocation, making decisions based on political agendas rather than sound financial principles. This could result in loans issued to politically connected businesses, ideological pet projects, and borrowers who lack the ability to repay. And when those loans fail, as they inevitably will, taxpayers will be left to cover the losses.
We’ve seen this story before. In states like Illinois, government-backed financial ventures have resulted in hundreds of millions of dollars in taxpayer losses. Yet public banking proponents continue pushing the false narrative that this time will be different.
North Dakota is often cited as a model, but the Bank of North Dakota is a unique case. It exists in a small, resource-rich state with a favorable regulatory environment, and it works in partnership with private banks rather than in competition with them. What’s being proposed in New Mexico is something entirely different; an effort to replace private financial institutions with a government-run monopoly.
State Rep. Patricia Roybal Caballero, D-Albuquerque, the lead sponsor of HB 130, has introduced versions of this bill year after year, despite widespread opposition and clear evidence that public banks are a failed idea. When asked directly if any other states have implemented public banks, she attempted to sidestep the question, eventually admitting that North Dakota is the only one. What she didn’t mention is that numerous states attempted public banking in the past and abandoned the concept after repeated failures.
New Mexico doesn’t need another bureaucratic money pit. The state already has financial entities that support economic development, such as the State Investment Council, the New Mexico Finance Authority, and the Economic Development Department. Instead of creating an unnecessary and risky government-run bank, lawmakers should focus on policies that encourage private investment, competition and financial innovation.
Former New Mexico Territorial Gov. Lew Wallace once said, “All calculations based on experience elsewhere fail in New Mexico.” Perhaps we should amend that to: If you see it in New Mexico, consider it a warning, not a blueprint.
New Mexicans deserve financial solutions that promote prosperity, not more government control. A state-run bank is not the answer. The Legislature should reject House Bill 130 and instead work toward restoring market-driven credit access that benefits businesses and consumers alike. Our state cannot afford another failed experiment in government overreach.
Originally published at abqjournal.com on February 11, 2025.