Update (1430ET): It turns out JPMorgan is not alone.
As we noted below, the new Texas law is hitting all the bulge bracket, virtue-signaling banks.
Bloomberg reports that since the Republican-backed law took effect on Sept. 1, neither Bank of America, Citigroup, or JPMorgan has managed a single municipal-bond sale in the state.
These 3 banks were the biggest underwriters (and therefore fee takers) in 2020...
All three banks have come out publicly to block and fundraising for gun-makers and that is what Texas Senate Bill 19 addresses, blocking government from working with companies that have a practice, policy, guidance or directive that “discriminates against a firearm entity or firearm trade association.”
In 2018, Bank of America said it would stop making new loans to companies that make military-style rifles for civilian use.
That same year, Citigroup said it would prohibit retailers that are customers of the bank from offering bump stocks or selling guns to people who haven’t passed a background check or are younger than 21.
JPMorgan Chief Executive Officer Jamie Dimon told a Congressional committee this year that his bank won’t finance gun companies that make military-style weapons for consumers.
Will they back down in the interest of fees? We highly doubt it.
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Following Texas lawmakers' decision to ban local government from working with Wall Street banks whose policies restrict the firearms industry, it appears JPMorgan is the first of the virtue-signaling banks to feel the pinch from the new law.
Earlier this year, JPMorgan CEO Jamie Dimon told a Congressional committee that his bank won’t finance gun companies that make military-style weapons for consumers.
In May, the Texas House of Representatives passed the bill that would block the state and local governments from contracting with banks and other financial-services companies that have policies that limit their work for the firearms or ammunition industries. The legislation reflected 2nd Amendment rights supporters' furore over corporations pushing themselves into the increasingly divisive policies of America’s identity-politics wars.
And now, as Bloomberg reports, the first impact of the law is hitting Wall Street.
This week, JPMorgan was replaced by UBS as the underwriter of a bond issue for the Decatur authority, an arm of a 7,000-person Texas city that operates Wise Health System.
In July, the agency had disclosed that it was planning to have JPMorgan serve as senior managing underwriter on a financing that could include the sale of up to $150 million of bonds.
The authority cited “uncertainty related to the implementation of new legislation passed by the State of Texas,” though it didn’t specify which law.
Texas’ fast-growing population has made it one of the biggest markets for the muni-bond business and more troubling for the banks in general is the fact that Texas-based issuers accounted for $58 billion of debt sales in 2020, the second-most of any state behind California, according to data compiled by Bloomberg.
JPMorgan was credited with working on $3.6 billion of long-term municipal-bond deals in Texas in 2020, according to data compiled by Bloomberg.
Now that's a lot of fees that JPMorgan, BofA, and Citi will be missing out on from here:
“While our business practices should permit us to certify, the legal risk associated with this ambiguous law prevents us from bidding on most business right now with Texas public entities,” Patricia Wexler, a spokesperson for the bank, said in an emailed statement.
Three words summed it all up to us - broke banks mounting!