Protecting those poor, discriminated against gun manufacturers

I have three things to say about this.

Texas lawmakers, frustrated with what they viewed as liberal political activism from some of the titans of American industry, banned banks last year from doing business with Texas municipalities unless they could certify to the state attorney general they don’t “discriminate” against the gun industry.

The Legislative Budget Board, which estimates the costs of proposed legislation, predicted no significant financial impact on the state or on local governments.

But in the first eight months since the law was enacted, local governments seeking to finance building projects through bonds — for instance school districts trying to build new football stadiums, cities looking to upgrade their airports — have already paid between $300 million and $500 million more in increased interest payments, according to a study from a University of Pennsylvania professor and a Federal Reserve economist based in Washington.

And the paper estimates the annual cost in higher interest payments will be around $445 million per year going forward, if nothing changes.

“There’s a cost to making this political statement. We can say that cost for Texas is between $300 million and $500 million dollars,” said Daniel Garrett, the professor.

The bill, SB19, was aimed at large banks that reconsidered their investment in the gun industry in the wake of the 2018 Stoneman Douglas High School shooting that left 17 dead. For instance, Bank of America refuses to fund companies that build military style rifles for civilian use. JP Morgan Chase won’t fund companies that sell guns to people under the age of 21. And Citigroup won’t fund those that don’t background-check all buyers.

Citigroup announced its updated policy on guns in a blog post one month after the Parkland massacre, with an executive vice president calling for “our grief to turn into action” and for the U.S. to “adopt common-sense measures that would help prevent firearms from getting into the wrong hands.”

The gun industry and its allies say the policies amounted to attempts from the banks to coerce customers to endorse their politics.

“Texas’ law has become probably the blueprint for other states considering similar legislation, and similar legislation has been introduced in congress,” said Mark Oliva, spokesman for the National Shooting Sports Foundation, which lobbied for SB19. Other states such as Georgia, Wyoming and Oklahoma have passed similar laws, Oliva said, and there are more to come.

[…]

The paper analyzed interest rates before and after five banks backed away from the state last fall — JP Morgan, Citi, Bank of America, Fidelity and Goldman Sachs — to estimate the effect of their departure. Those banks have traditionally financed about 15 percent of the total number of loans taken out by Texas governments, but the average size of those projects is about $120 million.

As a result, the effects are particularly concentrated among large school districts and cities that frequently borrow money to finance those larger projects, Garrett said.

“The way it would manifest is when they reach out to their banker to see how much it’s going to cost to, say, refinance the bonds they borrowed back in 2019, or something. Their banker is gonna say, Hey, I’m not in Texas anymore. And then when they call someone else, they’re gonna get a bid that looks really high,” Garrett said.

1. My first instinct was to be outraged at this story, but on reflection I see it as a sign of decline for the gun industry. They’ve entered a place similar to where the tobacco industry was in the 80s, which is to say where mainstream public opinion was turning decisively against them. And much like the tobacco industry at that time, the gun industry needs to be propped up by its hardcore political supporters, to try to slow down that decline. This is a long-term decline – it took 20-30 years for cigarettes to basically disappear from most people’s lives, and the gun industry has some powerful friends and deep pockets, with a lot of people still willing to buy their products – but I believe it’s there. When staid and status quo-oriented firms like those five banks would rather not do business with you, you’re on the way out whether you like it or not.

2. That said, in the short term things can get worse in various ways, and the price that cities and school districts will have to pay for this fit of pique is one of those ways. While rural and Republican areas will also feel some of this pain, the fact that it is cities and school districts on the sharp end of the stick here is very much a feature and not a bug as far as the law’s authors are concerned. They will feel no pressure to do anything about it.

3. Man, the list of laws we’re going to have to repeal or completely rewrite in order to undo the damage of 20+ years of Republican dominance in this state just keeps on getting longer. I hope someone better organized than I am is keeping track of this.

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One Response to Protecting those poor, discriminated against gun manufacturers

  1. Joel says:

    “undo the damage of 20+ years of Republican dominance in this state just keeps on getting longer. I hope someone better organized than I am is keeping track of this.”

    sort by date. no big.

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