After a 2018 mass capturing in Parkland, Florida, that left 17 individuals useless, JPMorgan Chase, America’s largest financial institution, publicly distanced itself from the firearms business. Its chief monetary officer reassured the media that the financial institution’s relationships with gunmakers “have come down considerably and are fairly restricted”.
That was then. This previous September, a brand new Texas regulation went into impact that bans state businesses from working with any agency that “discriminates” towards corporations or people within the gun business.
Texas’s new pro-gun business 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 “considerably” decreasing enterprise with gun producers would lead to exclusion from Texas’s profitable bond market. Texas bought greater than $58bn of bonds in 2020, and is at the moment the second largest bond market after California. (I’ll come again to California in a second.)
JPMorgan Chase had been among the many prime 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. But 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 significantly 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 huge 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 producers, in gentle of the brand new Texas regulation?
It caved to Texas. (By no means 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 Could 13, sooner or later earlier than the Buffalo mass capturing and fewer than two weeks earlier than the Texas capturing, JPMorgan despatched a letter to the lawyer common of Texas, declaring that the financial institution’s coverage “doesn't discriminate towards or stop” it from doing enterprise “with any firearm entity or firearm commerce affiliation based mostly solely on its standing as a firearm entity or firearm commerce affiliation,” including that “these industrial relationships are essential and invaluable”.
The Texas regulation barring the state from doing enterprise with any agency that discriminates towards the gun business is the primary of its sort within the nation. However related legal guidelines, described by gun business lobbyists as “Discover” legal guidelines, or firearm business nondiscriminatory laws, at the moment are working their method by a minimum of 10 statehouses, in response to the Giffords Legislation Heart to Stop Gun Violence. This yr, Wyoming handed a regulation that permits gun corporations 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 huge banks or every other giant firms about their “social tasks” to their communities. When company social duty requires sacrificing earnings, it magically disappears – even when it entails financing gunmakers.
However secondly, no agency needs to be penalized by pro-gun states like Texas for making an attempt to be socially accountable.
The best way to counter Texas’s regulation, and different Discover 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 business.
In different phrases, huge 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 achieve entry to the even bigger California bond market.
Bonus that comes with the second choice: you get to say you’re being socially accountable.
Robert Reich, a former US secretary of labor, is professor of public coverage on the College of California at Berkeley and the writer of Saving Capitalism: For the Many, Not the Few and The Widespread Good. His new e book, The System: Who Rigged It, How We Repair It, is out now. He's a Guardian US columnist. His e-newsletter is at robertreich.substack.com
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