
Illustration: Maura Losch/Axios
How much does it cost to blacklist America's biggest banks?
- Ask Texas, Axios' Kate Marino writes.
The big picture: The state is effectively pulling back from doing business with banks such as J.P.Morgan Chase, Goldman Sachs and Citigroup — on the grounds that they are investing in businesses with ESG (environmental, social and governance) policies, upsetting conservative state leaders.
Flashback: Determined to protect the oil and gas industry, state lawmakers demanded in 2021 that firms that "boycott energy companies" be cut off from doing business with Texas.
- In August, Texas' chief financial officer, Comptroller Glenn Hegar, unveiled a first-ever list of 10 financial firms — many of them heavy hitters — he said fit that bill.
- Sen. Ted Cruz has derided ESG policies as "woke" and "not capitalism."
State of play: Texas' anti-ESG policies are costing taxpayers about $416 million per year in the form of higher interest payments on municipal bonds, per a 2022 paper by Wharton Business School assistant professor Daniel Garrett and Federal Reserve economist Ivan Ivanov. The topic was highlighted recently by Bloomberg's Matthew Winkler.
- The biggest banks — like Chase, Goldman Sachs and Citibank — charge lower average fees and often have a broader pool of investors, Bloomberg reports. That usually translates to a lower cost of capital for the borrower.
- The Teacher Retirement System, Texas' largest public pension, sold positions in more than a half-dozen firms to comply with state law, per a year-end compliance letter obtained by Axios.
- Axios has filed a request under the Texas Public Information Act regarding the value of those divestments.
Zoom in: The city of Anna passed over Citigroup for a mandate to lead a bond offering last fall, despite Citi submitting the most attractive bid, financially, Bloomberg reported at the time.
- Citi offered Anna a rate of 4.215% on bonds totaling about $100 million. Investment bank Robert W. Baird & Co. offered 4.24% — and got the job.
- The cost differential to the city of about 20,000 people is $277,334, a city spokesperson told Bloomberg.
Between the lines: The difference in interest rates may seem small — but it adds up.
The impact: Texas has the highest possible credit rating, at AAA.
- But on routine borrowings the state is paying 0.19 percentage points more in yield — the equivalent of $1.9 million on every $1 billion of bonds — than California, which has a lower AA rating, according to data compiled by Bloomberg.

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