A 2021 Texas law banning municipalities from working with banks that “discriminate” against the gun trade has so far cost the state more than $300 million, according to a new study.
Last year, upset that some major financial institutions pulled out of relationships with the gun industry, Texas lawmakers passed SB 19, which requires banks to prove to the attorney general of the State that they do not ‘discriminate’ against gunsmiths and retailers.
“Any company that uses financial pressure to limit the ability of Texans to buy guns or ammunition should not be tolerated,” said Sen. Charles Schwertner, a Republican and one of the authors of the legislation, as the law was debated.
Legislative researchers at the time believed the bill would add no additional cost to doing business in the state, but that is far from the case, according to research by a University professor. of Pennsylvania and a Federal Reserve economist based in Washington, DC.
They found that with major lenders like JPMorgan Chase, Citibank, Bank of America, Fidelity and Goldman Sachs doing less business in the state due to the law, municipalities ended up paying $300-500 million. additional borrowing cases, faced with fewer options at higher interest rates in the bond market. The five Wall Street firms had traditionally funded about 15% of lending to local governments in Texas, with average projects worth about $120 million.
These agreements are used by school districts, airports, cities and other entities seeking long-term financing for capital-intensive projects such as infrastructure and stadiums.
“There is a cost to making this political statement. We can say the cost to Texas is between $300 million and $500 million,” Daniel Garrett of UPenn Told The Houston Chronicle.
Barring major changes, Texas governments can expect to pay an additional $445 million per year, according to their research.
It’s a major shift in Texas’ $50 billion municipal bond market, the second-largest in the nation behind California.
After the Parkland shootings in 2018, a number of banks changed the way they do business with the gun industry. Bank of America cut funding to those making military-style guns for civilians, while Citigroup stopped lending to retailers that failed to perform background checks on gun buyers.
At the time, Citi explained that the decision was a “common-sense measure that would help keep guns out of the wrong hands.”
Texas law hasn’t completely scared off big lenders.
In a letter to the state attorney general in May, JPMorgan touted its “longstanding business relationships” with firearms companies and said it “plans to continue such relationships in the future.” , arguing that its revised gun policies were not “discrimination”, but rather a more nuanced adjustment of its priorities.
“These business relationships are important and valuable,” he added.
The bank has led the financing of firearms deals worth $708 million since 2020, according to Dealogic data.
The recent shootings in Uvalde and Buffalo haven’t inspired the same kind of environmental and social governance (ESG) policy changes at large corporations that happened after Parkland.
“Banks were prepared to take these anti-gun stances before the Texas law, so why aren’t they standing up now,” said Dartmouth business professor Paul A Argenti. The New York Times.
States like Georgia, Wyoming, and Oklahoma have similar anti-gun discrimination laws for lenders.
As investors and consumers demand more of business leaders on social issues, conservative states have increasingly found themselves at odds with big business in their region.
In 2021, Republican lawmakers in Georgia battled with Delta and Coca-Cola, both based in the state, over their opposition to a new state law making it harder to vote.
Texas also criticized Lyft, which said it would help employees access abortion care in other states after Texas implemented new abortion restrictions.