In every capitalist society, the economy runs on credit. If businesses and individuals have access to credit they will spend on something, if banks limit their credit they will spend less. It is relatively easy method to see how the economy is doing, do business and people have access to credit?

Sometimes, banks have slightly more complicated relations to who gets credit and why?

In an article by Stephen Gandel of the New York Times News Service, after the Parkland Florida shooting of school children, one of the many pressure points on government and business was to reduce the credit or loans to gun manufacturers. In some states, this caused the gun manufacturers to move to more “friendly” states. One of the more friendly states is Texas and they have been passing laws to ensure gun manufacturers have access to credit. One of the laws is if the bank discriminates against gun manufacturers they can not do business with Texas government agencies.

According to Dealogic, JPMorgan since 2020 has raised $708 million for companies in the gun industry.

Texas is one of the largest states in the US and its municipal bond market is also one of the largest in the US. Wall Street investment banks have long made lucrative and relatively risk free fees underwriting municipal bonds. Texas’s municipalities borrow about $50 billion a year which translates into $315 million in fees, according to data from Bloomberg.

In Texas the investment banks have to send a letter to the State Attorney General to say they comply with the law. Then the investment bank can bid on state agencies – from utilities to municipal bonds. From 2015 to 2020 JPMorgan Chase underwrote 138 Texas bond deals raising $19 billion for the state generating $80 million in fees. In June, JPMorgan submitted a bid to underwrite a $3.4 billion for the utilities, the largest in state history.

Linking to dividend paying stocks, we often think there is government and there is business and sometimes the interests overlap and sometimes they are not aligned, but most of the time the interests are favorable to each other. Once in while a state will draw a line in the sand and it is up to the company to determine how much is the business worth in the state? What stance should a company draw a line in the stand? should shareholders approve it? What appears to be simple issues may be complicated because someone believes it is a line where they can be elected on and is that good?

There are more questions than answers, till the next time – to raising questions.