No Love Notes to “Woke” Bankers

Feb 14, 2022

It’s Valentine’s Day, 2022. And if you have just been hit with a burst of adrenaline, it’s the “fight or flight” response after realizing you’ve (once again) forgotten an important date.

Hopefully, you’re reading this in the early AM, not the late PM. If that’s the case, you still have time to go buy something extravagant.

Occasionally, only the grand gesture works.

Sometimes those grand gestures back up on you like a balky toilet. That’s a lesson some of the nation’s banks (and others) continue to forget.

When everyone started being “woke” that was all the excuse some executives needed to cut their firms’ ties with the firearms industry. They were “virtue signaling.”

They’re now realizing that virtues, even shallow ones, all come at a cost.

After several major banks and investment groups began shunning the firearms industry by denying gun-related businesses access to banking services, the National Shooting Sports Foundation has been quietly working with primarily Republican-led, but pro Second Amendment states to attach a penalty to the practice.

Texas has already passed anti-discrimination legislation. It prevents Bank of America Corp., Goldman Sachs Group and JP Morgan Chase & Co. from participation in the public-finance markets there.

GOP lawmakers in Arizona, Kentucky, Missouri, Ohio, South Dakota and West Virginia have legislation pending that would restrict those same bankers from participating in the very lucrative public-finance business in their states.

As you imagine, the bankers are squawking- loudly- about being “discriminated against.”

But their lobbyists are finding it tougher to convince legislators in Frankfort, Kentucky than in Sacramento, California, that their practices are legitimate business decisions. Instead they’re finding a different political reality in states that skew more red than blue.

The municipal finance market has always intertwined with politics. Bankers depend on relationships with officials to win business. I’ve covered more than one business story where those relationships got a bit too cozy, leading to city, county and state officials finding themselves residents of correctional facilities they once governed.

Today, as Financial Advisor reports to its readers, as “the nation is increasingly divided on issues from vaccines to education, financial institutions that restrict their dealings with gunmakers- and in some states, oil and coal companies as well- now face blowback even in the normally staid world of public finance.”

The municipal market is a $4 trillion dollar business. If -or when - these states pass their legislation, it will have the potential to really shake that business up.

Texas, where the law went into effect on September 1, writes around $50 billion in annual debt sales. Only California provides more business for bankers.

Opponents of the legislation say limiting the number of competitors for a state or municipality’s business is a “hidden cost to taxpayers.” Fewer lenders, they say, will lead to higher costs for access to capital.

The GOP legislators’ response?

They’re defending their constituents from “corporate America’s attack on their way of life.”

The NSSF’s Larry Keane has been involved in the NSSF efforts since their beginning. He says there’s a very simple solution: “banks,” he says, “can simply stop discriminating.”

At the SHOT Show governor’s roundtable, Keane continued to push the governors in attendance to push back against “woke banking.”

There’s no guarantee any of the proposed legislation will pass. Indiana’s legislation died in committee last month. We are, after all, talking about politics. And it seems politicians don’t always listen to their constituents once they get into office.

But these states are populated with plenty of staunch 2A supporters who are also voters.

Legislators tend to listen to them more closely when we’re approaching election years.

As the legislative battles continue, as always, we’ll keep you posted.

— JIm Shepherd