As the scandal at the New Mexico Finance Authority continues to unfold, we at the Rio Grande Foundation attempted to answer the question “What is the NMFA and what does it do?” Our follow-up question, asked of any government agency is, “Why does the government need to do this or could the private sector handle it better?”
On the first point, NMFA acts as a bank for government agencies in New Mexico and as the article discusses, this is not the first time it has been at the center of a scandal. The primary mission, although by no means the only job of NMFA, tends to center on accessing capital (bond) markets for government agencies throughout New Mexico. The particular beneficiaries of this activity are smaller cities and governments.
Of course, when the NMFA was organized in 1992, the bond market was concentrated in a few major cities like New York. You can now find people willing to buy and sell bonds here in New Mexico and even if you are in New York, through the use of technology, you can likely undertake the groundwork necessary to underwrite government bonds.
The questions I have regarding NMFA are: “Does New Mexico really need the NMFA as currently organized? How much is this entity costing taxpayers? It would seem that the bond markets are pretty efficient these days and, with return rates depressed, there will be plenty of lenders eager to sell bonds to New Mexico’s cities, counties, and other governing entities. Am I wrong? Why not privatize the NMFA?