As banks are banned from the Texas bond industry, interest rates are inflating and taxpayers are footing the bill.
The bans stem from a 2021 anti-ESG state law barring banks from underwriting municipal bonds if the bank is seen as boycotting or discriminating against the fossil fuel or firearm industries. The law pertains to any local government contract over $100,000, and has been enforced through investigations by Attorney General Ken Paxton .When voters approve a bond package, city officials go to major banks for the loans.
"That decreased competition drives up the cost for taxpayers and it makes the work that we do to dig our cities out of financial holes harder," Houston Controller Chris Hollins"Make no mistake, the twists and turns we must now navigate are contrived, devised and caused by select people here in Austin.
said the potential for differential pricing is a"concern." The county has begun seeking two broker dealers for investments"just in case one of them ends up on the list." Representatives from the Dallas City Controller's Office declined to respond to questions for this report.in Texas’ billion-dollar bond industry after being classified as a “fossil fuel boycotter.” The bank failed to provide the Attorney General with information pertaining to its “net zero” carbon emissions commitment upon request, leading to the ban.
UBS and Citigroup have also been barred from underwriting municipal bonds in the state. Wells Fargo and RBC Bankers met with staff from the Attorney General’s office last month as part of the banking probe,Bank of America, JPMorgan Chase, Morgan Stanley and TD Bank are among others that are being investigated as potential members of the Net Zero Banking Alliance., including JP Morgan Chase, which pledge to transition their investment portfolios to net zero emissions by 2050.
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