The Texas Attorney General, Ken Paxton, has withdrawn his threat to bar major US banks from participating in municipal bond deals following the departure of several Wall Street firms from the controversial Net-Zero Banking Alliance (NZBA).
Table Content:
Paxton’s office initiated a review in 2023, targeting the policies of financial institutions affiliated with the NZBA, an organization he has consistently criticized. This action stemmed from Texas legislation designed to penalize financial firms perceived as “boycotting” the oil and gas sectors. Recently, prominent institutions like JPMorgan Chase & Co., Bank of America Corp., Morgan Stanley, and Wells Fargo & Co. announced their withdrawal from the alliance.
Paxton Closes Reviews, but Firearm Policies Remain Under Scrutiny
Following these exits, Paxton’s office confirmed the closure of its reviews into Wells Fargo, Bank of America, Morgan Stanley, and JPMorgan. These firms are significant underwriters of state and local debt in Texas, a crucial market for municipal bond transactions. The Texas Attorney General’s office holds considerable sway over bank participation in these deals, as it requires pre-approval for most public bond offerings.
However, separate notices indicate that Bank of America and JPMorgan remain under scrutiny for their firearm policies. Another Republican-backed law restricts government collaborations with companies deemed to “discriminate” against firearm entities.
Banks Respond to Policy Scrutiny
JPMorgan spokesperson, Lauren Bianchi, affirmed the firm’s pride in supporting Texas’s energy sector and economy, expressing a commitment to continued contributions to the state’s growth and prosperity. Representatives for Wells Fargo, Bank of America, and Morgan Stanley declined to comment on the matter.
NZBA’s Climate Goals and Potential Conflicts
Paxton’s office asserted that the NZBA pressures members to prioritize “destructive climate goals” over their obligations to consumers and investors. The alliance’s aims, according to Paxton, undermine the vital oil and gas industries and could potentially hinder banks from securing contracts with Texas governmental entities.
Lawsuit Against BlackRock, Vanguard, and State Street
In a related development, Paxton spearheaded a lawsuit against BlackRock Inc., Vanguard Group Inc., and State Street Corp. in November. The lawsuit alleges antitrust violations, claiming these firms inflated electricity prices through their investment strategies. BlackRock responded by dismissing the accusation of intentionally investing in companies to harm them as “baseless” and “defying common sense.”
Conclusion: Shifting Landscape in Texas Financial Sector
The withdrawal of major banks from the NZBA and the subsequent closure of Paxton’s reviews signal a significant shift in the Texas financial landscape. While the immediate threat to banks’ participation in municipal bond deals has subsided, the ongoing scrutiny of firearm policies highlights the continuing tension between political agendas and corporate practices in the state. The lawsuit against BlackRock, Vanguard, and State Street further underscores the complex interplay between investment strategies, energy policies, and legal challenges in the current environment.
