Wells Fargo escapes muni underwriter ban in Texas

Wells Fargo is eligible to underwrite municipal bonds in Texas after the state attorney general's office said Friday it was unable to determine that the investment bank discriminates against the firearm industry.

A review of Wells Fargo's standing letter of compliance with a Texas law prohibiting state and local government contracts with companies that discriminate against firearm entities was launched July 26.

In a notice to bond counsel, the attorney general's office said "after reviewing the documents presented to us, we have not been able to determine that Wells Fargo has a policy or practice that discriminates against a firearm entity or firearm trade association."

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It added the office "will continue to rely on Wells Fargo's standing letter and will no longer ask for an updated certification shortly before closing." 

A Wells Fargo spokesperson declined to comment.

An official at the National Shooting Sports Foundation, which is advocating for anti-discrimination legislation, said the group "respectfully disagrees" with the decision and that Texas taxpayers should not "fund 'woke' Wall Street banks through state contracts." 

"(Wells Fargo has) debanked major members of our industry solely because of the legal, constitutionally protected products they make and sell," Lawrence Keane, the foundation's senior vice president and general counsel, said in a statement. 

Citigroup, the only other target of an attorney general review in Texas, was barred in January from participating in muni deals after the bank's commercial firearms policy was determined to be discriminatory.

UBS was ousted after it landed on the Texas Comptroller's list of fossil fuel industry boycotters last year under another state law. Both laws, which were enacted in 2021, have prohibitions for governmental contracts worth $100,000 or more.

The two banks were subsequently dropped from muni deals, including their role as co-managers for a March sale of $3.52 billion of Texas Natural Gas Securitization Finance Corporation taxable bonds.

A similar oil and gas industry boycott law enacted in Oklahoma last year, led to Wells Fargo's resignation in May as lead underwriter for a yet-to-be-sold $500 million Oklahoma Turnpike Authority deal. The move followed the bank's placement on the state treasurer's list of 13 financial firms determined to be boycotters.

While that list was shrunk to six earlier this month, Wells Fargo, along with other muni bond underwriters JP Morgan Chase and Bank of America, remained on it.

The revised list, which is also used for divestment purposes, included BlackRock and State Street. Those two firms were retained this week by the Oklahoma Public Employees Retirement System Board of Trustees under a fiduciary exemption allowed under the law, according to Joseph Fox, the pension system's executive director.

"The board determined that compliance with the divestment and contractual prohibitions of the Oklahoma Energy Discrimination Elimination Act would be inconsistent with its fiduciary responsibility with respect to the investment of entity assets or other duties imposed by law relating to the investment of entity assets," he said in an email.