Large out-of-state banks have been working to defeat a bill in the Texas legislature that would lock them out of the state’s lucrative municipal bond underwriting business because of their gun policies.
But as the proposal
“I don’t think it’s an issue in Texas with our banks domiciled here. We have remained neutral on this,” said Steve Scurlock, director of government relations for the Independent Bankers Association of Texas. “This may give some opportunity for expansion in the public finance space for our community banks.”
The bill would specifically require companies to certify that they do not have policies discriminating against firearm or ammunition businesses before receiving government contracts in Texas. The clear targets of the proposal are large banks that have in recent years put in place new restrictions on doing business with gun companies.
On the floor of the state House of Representatives Thursday, Republican Rep. Giovanni Capriglione, who has pushed the proposal through the chamber, rattled off several financial companies he believes have shut out the gun industry, including Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and U.S. Bancorp., along with Inuit, Square and PayPal.
“They should not be able to receive taxpayer dollars if they do not support the Constitution,” Capriglione said.
Opponents of the bill say that barring the largest banks from underwriting multi-billion dollar bond issuance packages from cities in the state will drive up prices and ultimately cost taxpayers.
But the Texas Bankers Association has split from the lobbying efforts of the biggest firms and said its members are ready to fill the bond underwriting void created by the bill’s restrictions.
“This is Texas where there is broad support for the Second Amendment by our elected state leaders and a large number of our bank members, so our association has not opposed the legislation,” the group’s general counsel, John Heasley, said in an emailed statement. “It is also a competitive marketplace, and in that context, individual institutions have to decide for themselves their policies and the implications based on the markets and customers they serve.”
Some state lawmakers are skeptical that smaller banks can pick up the slack in what has been an exploding business for financial companies. The $58.4 billion in municipal bond issuances in Texas last year represented a 33% increase from $43.9 billion in 2019, according to Refinitv data.
Citigroup led last year with 10.5% market share, followed by Morgan Stanley, RBC Capital Markets, Piper Sandler and Bank of America.
Citigroup made waves in 2018 after the mass shooting at Marjory Stoneman Douglas High School in Parkland, Florida, by announcing new restrictions on gun-related business customers. Specifically, Citi vowed not to offer its services to companies that sell firearms to those under age 21 as well as to firms that sell high-capacity magazines.
In a blog post at the time, Citi Executive President of Global Public Affairs Ed Skyler said that “we have waited for our grief to turn into action and see our nation adopt common-sense measures that would help prevent firearms from getting into the wrong hands.”
Banking lawyers are preparing to comb through the final version of the bill, assuming it is signed into law, but the current version is more far-reaching than similar proposals in other states, according to an industry source. Throughout the legislative process, industry representatives have met with Texas lawmakers and argued their firearm policies are not a form of discrimination.
The bill originated in the state Senate and passed in April to the House. Several amendments have since been added, including one that defines discrimination more broadly, and carve-outs for sole-provider government contractors. Community banks were able to get language clarified to ensure that requiring extra insurance for firing ranges and gun shops is not considered a form of discrimination, according to Scurlock.
Rep. Vikki Goodwin, a Democratic member of the state House who represents the Austin area, offered an unsuccessful amendment that would have provided an exemption on bond issuances, saying that only large banks can respond to these local government requests and that the bill “will severely limit who can underwrite those proposals.”
Another Democratic opponent of the bill, Rep. Michelle Beckley, offered an amendment that would have renamed the bill the “Snowflake Protection Act,” in reference to what she sees as a sensitivity to banks’ stances on the gun industry.
“We purport ourselves as a business-friendly state, yet members of this body want to take the First Amendment rights away from those same businesses we want to bring here,” Beckley said in comments on the House floor. Her amendment was voted down.
Republican state Senator Charles Schwertner, an author of the legislation, plans to concur with the changes that were made in the House, a process that requires a simple majority in the Senate, according to an aide in the Texas legislature.
“We plan to get those votes, then the bill will be on the way to the governor for his signature,” the aide said.
Given the pace of the bill’s progress through the Legislature, many in the banking industry believe the pathway has been cleared for the legislation to reach Abbott’s desk.
“This is a bit of a runaway train,” one industry source said.
