After a 2018 mass taking pictures in Parkland, Florida, that left 17 individuals useless, JPMorgan Chase, America’s largest financial institution, publicly distanced itself from the firearms trade. Its chief monetary officer reassured the media that the financial institution’s relationships with gunmakers “have come down significantly and are pretty limited”.
That was then. This previous September, a brand new Texas regulation went into impact that bans state companies from working with any agency that “discriminates” against companies or people within the gun trade.
Texas’s new pro-gun trade regulation requires banks and different skilled service companies submit written affirmations to the Texas lawyer common that they adjust to it.
What was JPMorgan to do? Sticking with its high-minded coverage of “significantly” decreasing enterprise with gun manufacturers would end in exclusion from Texas’s profitable bond market. Texas bought greater than $58bn of bonds in 2020, and is at present the second largest bond market after California. (I’ll come again to California in a second.)
JPMorgan Chase had been among the many high bond underwriters for Texas. Between 2015 and 2020, the financial institution underwrote 138 Texas bond offers, elevating $19bn for the state, and producing almost $80m in charges for JPMorgan, in response to Bloomberg. Yet because the new Texas regulation went into impact in September, the financial institution has been shut out of working for the state.
JPMorgan’s dilemma since Texas enacted its regulation has been notably delicate as a result of Jamie Dimon, its chairman and CEO, has been preaching the doctrine of company social duty: repeatedly telling the media that massive banks like JPMorgan Chase have social duties to the communities they serve. (On Wednesday, Dimon dismissed claims that such an method is “woke.”)
So what did JPMorgan determine to do about financing gun manufacturers, in gentle of the brand new Texas regulation?
It caved to Texas. (Never thoughts that final yr, the financial institution’s board granted Dimon a particular $52.6m award – which is nearly three-quarters of the charges the financial institution acquired from underwriting Texas bonds between 2015 and 2020.)
On May 13, sooner or later earlier than the Buffalo mass taking pictures and fewer than two weeks earlier than the Texas taking pictures, JPMorgan despatched a letter to the lawyer common of Texas, declaring that the financial institution’s coverage “does not discriminate against or prevent” it from doing enterprise “with any firearm entity or firearm trade association based solely on its status as a firearm entity or firearm trade association,” including that “these commercial relationships are important and valuable”.
The Texas regulation barring the state from doing enterprise with any agency that discriminates against the gun trade is the primary of its form within the nation. But related legal guidelines, described by gun trade lobbyists as “Find” legal guidelines, or firearm trade nondiscriminatory laws, at the moment are working their method via at the least 10 statehouses, in response to the Giffords Law Center to Prevent Gun Violence. This yr, Wyoming handed a regulation that enables gun companies to sue banks and different companies that refuse to do enterprise with them.
The lesson right here is twofold.
First, pay no consideration to assertions by massive banks or some other giant firms about their “social responsibilities” to their communities. When company social duty requires sacrificing income, it magically disappears – even when it entails financing gunmakers.
But secondly, no agency must be penalized by pro-gun states like Texas for making an attempt to be socially accountable.
How to counter Texas’s regulation, and different Find legal guidelines within the pipeline? Lawmakers in progressive states resembling California (whose bond market is even bigger than Texas’s) ought to instantly enact laws that bars the state from coping with any agency that funds the gun trade.
In different phrases, massive banks like JPMorgan ought to have to decide on: both finance gunmakers and get entry to the Texas bond market. Or don’t finance them and acquire entry to the even bigger California bond market.
Bonus that comes with the second choice: you get to assert you’re being socially accountable.