Guns, Big Banks, and Corporate Silence
In a letter sent to the Texas attorney general this month, JPMorgan, the nation’s largest bank, signaled its willingness to continue working with the firearm industry. The letter described the bank’s “longstanding business relationships” with the industry in the state, noting that it “anticipates continuing such relationships into the future."
The letter, which was sent by lawyers representing the bank from the firm Foley & Lardner on May 13, was in response to a new law in Texas that bans state agencies from working with a firm that “discriminates” against companies or individuals in the gun industry. One provision of the law requires banks and other professional service firms to submit written affirmations that they comply with the law.
The bank’s policy “does not discriminate against or prevent” it from doing business “with any firearm entity or firearm trade association ‘based solely on its status as a firearm entity or firearm trade association,’” the letter declared.
“These commercial relationships are important and valuable,” JPMorgan added. Since the beginning of 2020, the bank has led the financing for deals that raised $708 million for companies in the gun industry, according to data from Dealogic.
Citigroup, which restricted certain types of sales of firearms and ammunition with its credit and debit card systems after Parkland, filed a similar letter with the Texas attorney general in October. In it, Citi stated that it did not “have a practice, policy, guidance or directive that discriminates against a firearm entity or firearm trade association.”
The stakes are high for big banks. If a bank states that it is in compliance with the law and is found to be otherwise, it could face criminal prosecution. It could also be shut out of the state’s giant municipal bond market. Texas is one of the biggest bond issuers in the country, and Wall Street has long made lucrative — and relatively risk-free — fees underwriting municipal bonds. With $50 billion in annual borrowing, Texas generated $315 million in fees last year alone for financial firms, according to data from Bloomberg.
As large companies grapple with how to respond to national tragedies and looming social issues, including the debate over gun control or abortion, laws like S.B. 19 make it harder to take a stance. The result is a corporate tug of war playing out across the country, as companies try to appease large, vocal employee bases and advocacy groups without alienating customers and advocates on the other side of the political spectrum — all while trying not to run afoul of local regulations that could hurt their bottom line.
- DealBook, 5/28/22
