Four years ago, JPMorgan Chase joined some of the nation’s largest banks to publicly distance itself from the firearms industry after a mass shooting in Parkland, Florida, that killed 17 people.
JPMorgan’s relations with arms manufacturers “have declined significantly and are quite limited,” Marianne Lake, then the bank’s chief financial officer, told reporters. “We have robust risk management practices and policies associated with this,” she said.
The bank, along with Citigroup and other Wall Street firms, did not completely close the door to arms companies.
In a letter sent this month to the Texas Attorney General, JPMorgan, the nation’s largest bank, indicated its willingness to continue working with the firearms industry. The letter described the bank’s “long-term business relationships” with industry in the state, noting that it “anticipates continuing such relationships in the future.”
The letter, sent on May 13 by attorneys representing the bank for the firm of Foley & Lardner, was in response to a new Texas law that prohibits state agencies from working with a firm that “discriminates” against companies or individuals in the United States. rifle industry. A provision of the law requires banks and other professional service providers to provide written representations that they are complying with the law.
The bank’s policy “does not discriminate against or prevent it from doing business with any firearms entity or trade association ‘based solely on its status as a firearms entity or trade association,'” the letter said.
“These commercial relationships are important and valuable,” added JPMorgan. As of early 2020, the bank has been leading the financing of deals that raised $708 million for companies in the arms industry, according to data from Dealogic.
Citigroup, which after Parkland restricted certain types of firearms and ammunition sales with its credit and debit card systems, filed a similar letter with the Texas Attorney General in October. In it, Citi stated that it had “no practice, policy, guidance or guideline that discriminates against any firearms entity or firearms trade association.”
The stakes are high for large banks. If a bank claims it is following the law and turns out to be different, it could face criminal charges. It can also be excluded from the state’s giant municipal bond market. Texas is one of the largest bond issuers in the country, and Wall Street has long made lucrative — and relatively risk-free — fees for insuring municipal bonds. With $50 billion in annual loans, Texas generated $315 million in fees for financial firms last year alone, according to Bloomberg data.
According to Bloomberg data, JPMorgan underwrote 138 Texas bond deals from 2015 to 2020, raising $19 billion for the state and nearly $80 million in fees for the bank. But since the law came into effect in September, the bank is no longer allowed to work for the state. This month, JPMorgan made an offer for a $3.4 billion utility bond issue, the largest in state history. It wouldn’t be able to get that contract until it’s certified under the new law known as SB 19.
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As major corporations grapple with how to respond to national tragedies and looming social issues, including the gun control or abortion debate, laws like SB 19 make it harder to take a stand. The result is a business tug-of-war across the country as companies try to appease large, rowdy employee and interest groups without alienating clients and lawyers on the other side of the political spectrum — while trying not to breach local rules that could harm their profits.
Last year, Delta Air Lines and Coca-Cola faced strong opposition from Republican lawmakers in Georgia, where both companies are headquartered, as the companies oppose a new state law that would make it more difficult for people to vote. Lyft was targeted by Texas officials after it said it would help workers seek abortion care in other states in response to a restrictive new law passed there.
Last week, calls for gun control grew louder after an 18-year-old attacked an elementary school in Uvalde, Texas. It was one of the deadliest school shootings in America ever.
Unlike after the Parkland shooting, the leaders of the country’s largest companies – including the major banks – have been largely silent this time.
“The banks were willing to take this stance against guns before Texas law, so why aren’t they standing up now,” said Paul A. Argenti, a business professor who studies public relations and ethics at Dartmouth’s Tuck School of Business. . “Here’s some of the shareholder board, but if you’re a CEO like Jamie Dimon at JPMorgan, you can say we’re making a decision that’s better for our profits and our society in the long run and you won’t be sued.”
The banks, for their part, have said they have not changed their stance since Parkland.
A Citi spokesperson said the bank had not changed its policies on the arms industry since they took effect in March 2018. And a spokeswoman for JPMorgan said: “We are consistent in our position that we are not manufacturers of military-style weapons for civilian use.”
In its letter, filed before the Uvalde attack, JPMorgan also claimed that it viewed the firearms industry as “high risk”, which subjected its customers to greater due diligence requirements.
The Texas law is the first of its kind in the country. Similar — described by gun industry lobbyists as FIND laws, or non-discriminatory firearms laws — are working their way through at least 10 state houses, including in Oklahoma and West Virginia, according to the Giffords Law Center to Prevent Gun Violence. This year, Wyoming passed a law that allows arms companies to sue banks and other companies that refuse to do business with them.
However, some states seem less ready to pass these kinds of gun laws. In March, a bill that would mandate banking services for weapons companies in Arizona was blocked by Republican lawmakers who said the government shouldn’t step in to tell banks who to lend to. In Louisiana, a law similar to SB 19 was passed by both the State House and Senate in 2021, but it was rejected by Democrat John Bel Edwards, governor.
Mark Oliva, a spokesman for the National Shooting Sports Foundation, an industrial trade group, said FIND laws were needed as gun companies have been increasingly denied services by the country’s largest banks in recent years. The group has helped pass similar laws outside of Texas.
“We presented to Congress evidence from our member companies that they have been denied access to the banking industry and access to capital simply because they make firearms, which are a legal product and the right to own them is protected by the Second Amendment. ‘ said Mr. Oliva.
He argued that Citigroup was already in violation of Texas law. “Citigroup certified with the state and said they do not discriminate, but you can go on their website and you can see the policy on their website that says they will not do business with the firearms industry,” said Mr. Oliva.
In response to the group’s claims, the Texas Attorney General opened an investigation into Citi’s practices. In response to the investigation, the bank said it believed it was complying with the law.
Representatives of the attorney general and the governor did not respond to messages asking for comment.
Dru Stevenson, a professor at the South Texas College of Law in Houston who majored in SB 19, called Texas and other FIND laws bad public policy. He said the laws would most likely help proliferate weapons and increase borrowing costs for cities, utilities and other government agencies. He also suggested the law could lead to more loans being diverted to gun shops and the arms industry in general as banks tried to abide by the rules. JPMorgan also expressed concern about “too broad or result-oriented interpretations” of the law.
“Banks should think twice about turning down a gun store loan because the law forces them to justify, unlike other small business loans, why they declined it,” said Mr Stevenson.
