LINE IN THE SAND: Banks must not exclude firearms industry if they want to participate in bond market, says new Texas law
09/09/2021 // Franz Walker // Views

A new Texas law will require banks underwriting the state's municipal bond market to certify by Wednesday, Sept. 8, that they're not excluding the firearms industry.

Municipal and state debt in Texas is underwritten by some of America's largest banks, including JPMorgan Chase, Citibank and Bank of America. But in doing so, these banks have tailored restrictions in a way that appears to bar financing to certain parts of the firearms industry, such as companies that manufacture or sell bump stocks or sell to customers under 21.

Under the new law, signed by Gov. Greg Abbot in June, banks and other businesses seeking municipal or state contracts worth $100,000 or more are required to certify that they don’t exclude firearm or ammunition industries and retailers. (Related: Gov. Abbott supports legislation to make Texas a Second Amendment sanctuary state.)

"Compliance with Senate Bill 19 requires written verification in the contract that the company does not have a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association and will not discriminate against a firearm entity or firearm trade association during the term of the contract," reads a letter by Leslie Brock, Texas’s assistant attorney general and chief of the Public Finance Division, obtained by Bloomberg Law.

Banks must decide whether or not they will comply

Analysts state that Brock's letter makes it "extremely clear" that Texas is taking a stricter approach to compliance.

According to Tom Sage, a partner in Hunton Andrews Kurth’s Houston office, banks "will have to make that decision whether or not they feel that they can comply with this law or not."


Texas issuers sold more than $58 million worth of bonds in 2020. This made the state the second-largest market after California, according to Bloomberg.

JPMorgan Chase, Citibank and Bank of America are among the top bond underwriters in the state, though other major U.S. and international investment banks also participate in the market.

"While we believe our business practices should permit us to certify, we continue to assess our next steps as we try to understand how Texas will interpret the law," stated JPMorgan spokesperson Patricia Wexler.

Back on May 27, JPMorgan Chase CEO Jamie Dimon told the House Financial Services Committee that the bank serves manufacturers of assault-style weapons for military and law enforcement, but does not serve manufacturers for civilian use.

Meanwhile, both Bank of America and Citibank declined to comment. Citibank, however, referred to a June 23 blog post that said that it would continue doing business in Texas. It said that the law did not conflict with a policy adopted in 2018 requiring retail firearms industry clients to use "best practices." These included background checks, barring the sales of bump stocks and high-capacity magazines and prohibiting sales to those under 21.

Bank of America, on the other hand, previously said in 2018 that it would stop making loans to companies manufacturing military-style rifles for civilian use. This was after more than 150 of the banks' employees were affected by mass shootings in the preceding years.

Citibank and Bank of America called out for their gun policies

Texas Senate Bill 19 isn't the first time that Republican state officials have sought to punish Citibank and Bank of America for their gun policies. Back in 2018, Louisiana state officials voted to ban both banks from working on a debt sale.

"No one can convince me that keeping these two banks in this competitive process is worth giving up our rights," said Louisiana State Treasurer John Schroder in a statement at the time.

Nationally, Republicans have criticized companies for stepping into politics with Senate Minority Leader Mitch McConnell saying that corporate executives  should "stay out of politics."

Texas, however, offers bigger business with its $3.9 trillion municipal bond market. At the same time, the state's booming population makes it ripe for future sales thanks to the mounting need for new roads, schools and other infrastructure projects.

Citibank and Bank of America are the two biggest banks in the state and local debt market. Citibank was the biggest underwriter of muni-bond sales in the state last year. It's credited with managing more than $6 billion in sales. Meanwhile, Bank of America was ranked as the fifth-biggest last year, managing about $3.8 billion of bonds.

Whether or not either bank will decide to change its policies is unknown. But experts don't think the banks will pull out of the lucrative market over this issue.

Steven Craig, professor of economics at the University of Houston, who specializes in municipal finance said that the banks are unlikely to drop business with the state over one issue. However, he noted that compliance costs could become prohibitive if state lawmakers keep adding certifications.

“The tendency is bad and you’re adding on costs without really affecting the world in a way that you might want to,” said Craig.

Learn more about how Texas is protecting its citizens' right to bear arms at

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