By MILAN SIMONICH
The Santa Fe New Mexican
Contrary to popular mythology, useless legislation isn’t only a strain on paper-pushers at the state Capitol. These measures can be dangerous.
That’s the case with two bills before the Legislature. Backers of both proposals claim they would be good for consumers, and they are happy to spread false information to advance that theme.
I’ll deal first with House Bill 59, a poorly written, badly researched measure. Rep. Doreen Gallegos called the bill “clear as mud” after it was presented to the committee she chairs.
The proposal would exempt tech companies transacting payday advances from the New Mexico law regulating small loans. Along with the two representatives sponsoring this proposal, only lobbyists and industry insiders have spoken up for the bill.
That should surprise no one. HB 59 could create a loophole for predatory lenders to regain footing in New Mexico.
One of the more inaccurate claims about the bill came from Phil Goldfeder, CEO of something called the American Fintech Council. His organization represents companies that hope to escape regulation under New Mexico’s Small Loans Act.
In an opinion piece in The New Mexican, Goldfeder wrote that what he calls earned-wage advances give workers “a responsible and flexible alternative that providers offer at low or no cost”. Referencing a recent column I wrote, Goldfeder continued: That hasn’t stopped some from erroneously comparing EWA to a loan.”
Nah. I didn’t compare payday advances to loans. They are loans, and that’s what I wrote. My source is Raúl Torrez, the state attorney general.
Here are the most important sentences in the attorney general’s analysis of HB 59: “This bill proposes a new regulatory structure for services that advance money for earned but unpaid wages and allows for the service provider to seek repayment in the future. Currently, these transactions would fit the definition of a loan or extension of credit under New Mexico law, which imposes an interest rate cap at 36%.”
I emailed Goldfeder and asked him if the attorney general got it wrong. Goldfeder did not reply.
Fred Nathan, who heads the policy organization Think New Mexico, questioned the validity of Goldfeder’s campaign. “There is something very wrong with their business model if Goldfeder’s fin tech members do not believe they can make a profit at 36% and have to pass a new law to circumvent New Mexico’s Small Loan Act,” Nathan said.
The bill sits in Rep. Gallegos’ Commerce and Economic Development Committee. That’s where the measure should die.
Its sponsors, Democratic Reps. Micaela Cadena of Las Cruces and Tara Lujan of Santa Fe, have insisted their bill is needed because payday advances are unregulated. They must have missed the attorney general’s finding, even though it’s included in the staff analysis of their bill.
Another useless bill with potential to cause damage calls for $110 million to be taken from the general fund to establish a state public bank.
The measure, House Bill 130, is an old chestnut. It was proposed in 2021, 2022 and last year, always with breathless claims about the jobs and economic growth it might create.
Proponents downplay the risks. Taxpayers might lose money. Community banks could be hurt by a state venture. And a public bank might make decisions based on political calculations instead of sound financial policy.
Often using hyperbole and falsehoods, proponents of the bill testified recently before the Gallegos’ committee.
“North Dakota’s where public banking started in the U.S.,” said one backer of the bill.
That is false. Proponents of the bill speak all the time about icy, isolated North Dakota operating a state bank since 1919. They avoid the long history of failed public banks. Before North Dakota’s venture, public banks failed in Alabama, Arkansas, Florida, Georgia, Illinois, Kentucky, Mississippi, North Carolina, Vermont and Virginia.
Rep. Cristina Parajón, D-Albuquerque, asked the bill sponsors a straightforward question about public banks: “Did you say other states have this, or there’s only one in the U.S., in North Dakota?”
Rep. Patricia Roybal Caballero, D-Albuquerque, took a rambling trip around the mulberry bush to avoid a direct answer. “There are, I think, about 30 states that are in the process or in the flux of establishing, of going through the processes and the procedures of establishing, but currently there is only the one that has been established” in North Dakota.
Typical of the advocates, Roybal Caballero attempted to make it seem like state-owned banks are about to celebrate grand openings all across the country.
According to Roybal Caballero’s jargon, New Mexico has had a public bank in flux since 2021. She and her co-sponsor, Sen. Jeff Steinborn, D-Las Cruces, introduced five previous bills for a state bank.
Led by then-Mayor Javier Gonzales, Santa Fe officials for months prattled about creating a public bank. They finally admitted the idea was unworkable.
Redundancy is the distinguishing feature of the bill by Steinborn and Roybal Caballero. Even if a public bank were run without scandal, ineptitude or favoritism, it would duplicate services already provided by the State Investment Council, the New Mexico Finance Authority and the state Economic Development Department.
Advocates like the sound of a public bank. I like keeping $110 million available for the public good.
That money could send kids to college, create safer highways or head off wildfires. The possibilities are endless. Bank on it.
Editor’s note: Ringside Seat is an opinion column about people, politics and news. Contact Milan Simonich at msimonich@sfnewmexican.com or 505.986.3080.