The legislation, proposed by a Democrat from Orange County in the state Senate, aims to "prohibit financial institutions that do business with gun manufacturers from doing business with the state of California," according to the bill's text. If passed, it could have significant implications for one of the largest sectors of the municipal-bond market.
As a few states consider measures to limit government dealings with firms that limit the gun industry, Wall Street banks have become embroiled in the US firearms debate. The proposed legislation in California is the inverse of a law passed in Texas in 2021, which prohibits most government contracts with companies that curtail their business with the gun industry.
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According to Bloomberg's data, California issuers sold $46 billion of municipal bonds in 2022 and $84 billion in 2021.
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The proposed bill follows two mass shootings in California that left 18 people dead and a deadly spree at Michigan State University, which claimed the lives of three students.
"There is no place in America that is safe from the epidemic of gun violence," said Senator Dave Min, the author of the bill. "Unfortunately, this epidemic is being bankrolled by financial institutions that have turned a blind eye towards the horrors that their investments in the gun industry have created."
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If the proposed legislation is passed, it would affect every aspect of California's public finances, including "municipal bonds, capital projects, and the state's debt portfolio," according to a press release. The bill would require "financial institutions that do business with the State to adopt the same approach with their investment portfolios if they wish to continue banking transactions with the State of California."
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The Bond Buyer reported on the proposed legislation earlier.
In 2021, Texas legislators passed the opposite of California’s new bill, which prevents public contracts from being made with corporations that have tight regulations on the gun industry. Since the regulation was put into place, Bank of America Corp. and Goldman Sachs Group, Inc. have not been involved in any sales from the state of Texas or its cities. Citigroup Inc. was also recently excluded from the market by Attorney General Ken Paxton since it did not comply with its policy.
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