California bill would bar banks with firearms ties from bond work

A bill introduced in California's legislature would prohibit banks or lenders with business customers that manufacture firearms from working on the state's public finances.

Senate Bill 637, introduced Thursday by California Sen. Dave Min, D-Costa Mesa, applies to every aspect of the state's public finances including municipal bonds, capital projects and the state's debt portfolio, according to Min's news release.

"Michigan State. Half Moon Bay. Monterey Park. And on and on and on. There is no place in America that is safe from the epidemic of gun violence," Min said. "And unfortunately, this epidemic is being bankrolled by financial institutions that have turned a blind eye towards the horrors that their investments in the gun industry have created."

If the bill survives the legislative gantlet, it would mark a blue state riposte to governments in Republican-controlled states, notably Texas, that have denied business to banks they believe don't support the gun industry.

The bill at present consists of a boilerplate sentence that says it will be amended "to include provisions that would prohibit financial institutions that do business with firearms manufacturers from doing business with the state of California."

The bill's intent, according to Min's release, would mark a commitment by the state to ending the gun violence epidemic as reflected by its public finances.

"SB 637 will force Wall Street to make a choice between the blood money offered by the gun industry and doing business with the State of California, sending a clear message and more importantly a strong market signal that the State of California will not, either directly or indirectly, finance gun violence," Min said.

In Texas, a law that bans banks deemed by the state government to "discriminate" against the firearm industry has put some major underwriters on the sidelines, most recently Citigroup.

But dozens of underwriters have filed standing letters with the Municipal Advisory Council of Texas attesting to their compliance with the firearms law, many of which are players in the California market, including Stifel, Wells Fargo and Siebert Williams Shank & Co.

One study reported that the cost of issuing bonds in Texas rose after the state banned banks that "discriminate" against fossil fuel or gun manufacturingbusinesses from working on state business.

On the flip side, Nevada hasn't barred banks invested in gun manufacturing from working on state business, but the state did sell off its own investments in such enterprises, and its portfolio did betterbecause lawsuits against gun manufacturers have made investing in them a high risk venture, Nevada Treasurer Zach Conine told The Bond Buyer for a previous article.

Min said in his news release that the bill could have an enormous impact on gun manufacturing, because the industry is heavily capitalized by major Wall Street firms.

He pointed to the $3.1 trillion in banking transactions handled by the California State Treasurer's Office annually, which includes bond sales and the state's debt and investment portfolios.

"We are analyzing the bill and its impact to the State Treasurer's Office. While we have no position at this time, Treasurer Ma strongly supports Sen. Min's desire to end gun violence," said Joe DeAnda, a spokesman for State Treasurer Fiona Ma, whose office oversees state government bond sales.

Since Min was elected in 2020, he has authored four bills aimed at lessening gun violence, including last year's SB 915, which ended the sale of firearms and ammunition on state property, effectively ending gun shows on county fairgrounds in the state. 

Min is running to replace U.S. Rep. Katie Porter in California's 47^th Congressional District.

Porter, who secured a third term in the 2022 election, is running to replace Sen. Dianne Feinstein, who has announced she will retire next year.