JPMorgan’s work in Texas Muni becomes latest fallout of culture war – The Madison Leader Gazette
(Bloomberg) – America’s largest bank has said it can no longer undergo municipal bond deals in Texas after the state enacted legislation banning government work with banks that restrict doing business with the gun industry.
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Due to the legislation, JPMorgan Chase & Co. will not make an offer with public entities in Texas, a key market where the bank underwrites $ 3.6 billion in municipal debt sales in 2020. Borrowers based in Texas Texas sold more than $ 58 billion in bonds in 2020, the most of any state after California, according to data compiled by Bloomberg. As part of bond offerings, borrowers often engage banks in advance and pay them a fee to secure sales.
This is one of the first signs of the fallout from the Texas GOP’s efforts to punish Wall Street banks for their restrictive gun policies, with gun-friendly state politicians seeing it as a way. to retaliate against them for influencing America’s tense cultural wars.
The law prohibits government entities from working with a company that “discriminates” against firearms and ammunition companies or organizations, according to Republican Gov. Greg Abbott, who has touted the legislation.
âWhile our business practices should allow us to certify, the legal risk associated with this ambiguous law currently prevents us from bidding on most business with Texas public entities,â said Patricia Wexler, spokesperson for the bank, in a press release sent by email.
The law was enacted as part of a wave of GOP legislation, such as a law that restricts abortion rights and another that punishes cities that fund their police services. As part of Senate Bill 19, companies are required to provide written verification that they are complying with the law, which applies to a contract worth at least $ 100,000.
JPMorgan has been ranked as the seventh largest out-of-state agreement underwriter, which is one of the largest markets for muni-bond business thanks to its rapidly growing population.
This legislation could be detrimental to municipal issuers in Texas, depending on the number of banks “captured” by the new law, said Martin Luby, professor of public affairs at the Lyndon B. Johnson School of Public Affairs at the University of Canada. Texas. in Austin. âThere is concern that the state and local governments will not have access to as many investors if the big banks do not participate in these transactions. “
Earlier this year, JPMorgan CEO Jamie Dimon told a congressional committee his bank would not fund gun companies that make military-style guns for consumers.
Read more: BofA and Citi risk hitting Texas businesses over gun policies
However, the effect of the law is not entirely clear in Texas. Another bank under the law, Citigroup Inc., said in June that it did not believe it was affected by the law. In 2018, Citi said it would ban retailer customers of the bank from offering large-caliber inventory or selling firearms to people who have not passed a background check or are under 21 years old. The bank was ranked as Texas’ largest municipal sales underwriter in 2020, when it was credited with underwriting $ 6.3 billion in long-term sales.
Bank of America also announced in 2018 that it would stop making new loans to companies that manufacture military-style rifles for civilian use. His policy came after dozens of employees lost family members or suffered other trauma from mass shootings in recent years.
Bank of America has been credited with underwriting $ 3.8 billion in municipal debt sales in Texas in 2020, making it the fifth largest underwriter in the country. A spokesperson for Citi did not comment immediately on Thursday. Representatives for Bank of America and UBS did not respond to a request for comment.
This is not the first time that municipalities or states have sought to punish Wall Street by cutting them off from new business. In 2018, Louisiana officials banned Bank of America and Citi from selling bonds, citing their restrictive gun policies.
And states like California in 2016 suspended Wells Fargo & Co. from obligations related to the bank’s fake accounts scandal.
The law is already blocking new business for JPMorgan.
This week, JPMorgan was replaced by UBS Group AG as underwriter of a bond issue for the Decatur Hospital Authority of Texas, a local agency, according to a security deposit Thursday. The authority is a branch of a Texas city of 7,000 people that operates the Wise Health System. Decatur is the seat of Wise County and is located approximately 105 kilometers northwest of Dallas. In July, the agency revealed that it was planning to put JPMorgan in the role of senior management underwriter on a financing that could include the sale of up to $ 150 million in bonds.
The authority cited “the uncertainty surrounding the implementation of new legislation passed by the state of Texas”, although it did not specify which law.
Todd Scroggins, chief financial officer of Wise Health, did not respond to a request for comment, nor did a spokesperson for the hospital.
Related: Citi Says Texas Gun Law Does Not Affect Wall Street
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