(The Center Square) – The Louisiana Bond Commission removed JPMorgan Chase from a $700 million gas-and-fuel tax bond series Thursday, after the bank failed to respond to questions about its firearm lending policies.
JPMorgan had been selected for the tax revenue bonds but came under scrutiny last month when Louisiana Attorney General Jeff Landry inquired about the bank’s lending practices regarding gun manufacturers and the legal exercise of Second Amendment rights.
The issue came to a head during Thursday’s monthly meeting, which included a tense exchange between Landry and bond commission chairman and state Treasurer John Schroder.
Despite agreeing on substance and ultimately voting together, Schroder and Landry argued about the commission’s communication breakdowns regarding the JPMorgan issue. At one point, Schroder cut off Landry’s microphone.
When order resumed, Schroder explained the decision to remove the bank from consideration. He recounted how the commission added two “gun rights” questions to the commission’s underwriter approval application three years ago, when some large banks began restricting financial services to the firearms industry.
Two banks – Bank of America and Citibank – subsequently were disqualified.
“They answered 'no' and it should have been 'yes,' ” Schroder said.
With respect to JPMorgan, Schroder said, “Same scenario. Same two questions asked.
“JPMorgan answered 'no.' The attorney general, through his means, found some testimony that I was made aware of, and my legal staff believes contradicts the answer in the request for proposal,” Schroder said. "They answered 'no' and their actions show otherwise.”
Schroder said he sent a “qualifying question” to the pool of 11 banks that applied for the gas-and-fuel tax bonds after last month’s commission meeting.
“JPMorgan didn’t even reply,” he said
Wells Fargo was next in line according to the original bid process. The commission's staff director testified that Wells Fargo had lowered its fees to meet JPMorgan’s price. She estimated $40 million in net present value savings.
Matthew Block, an attorney representing Gov. John Bel Edwards, expressed concern over pressuring “nonstate actors” to comply with the commission’s stance on gun rights, saying Second Amendment infringements apply to the government not private businesses.
“I think we need to be very direct about what we’re doing here because … this is a road that leads us to someplace where none of us know where we’re going,” Block said.
“What we’ve done is disqualify Bank of America, we’ve disqualified Citibank and now we are on the road apparently to disqualifying JPMorgan Chase from negotiated bond deals,” Block said.
Schroder said the commission’s decision only would affect JPMorgan on the particular bonds at hand and would not bar the bank from other business with the state.
Division of Administration Commissioner Jay Dardenne said disqualifying banks could lead to higher prices and less competition in the future, though he and Block both voted to remove JPMorgan.
“We absolutely need to act on these items,” Dardenne said.
Schroder and Landry’s conflict stems from events occurring before last month’s bond commission meeting.
Schroder said he was taken aback when he saw media reports that Landry had acted on his own when confronting JPMorgan over its alleged underwriter application violations. Landry said he was cut out of intervening in commission deliberations.
Landry again made news before Thursday’s meeting, this time for posting a letter from gun manufacturer Sig Sauer on his social media accounts. The letter was addressed to Landry and dated Oct. 27.
“I can report that we have contacted JPM about lending and it responded that it does not service the firearm industry,” Sig Sauer Chief Financial Officer Chris Erickson said. “If a bank is unwilling to loan to a company like ours with its long history of creditworthiness, it is difficult to assume this unwillingness is based in traditional business reasoning.”
In an accompanying tweet, Landry said, “This revelation further cemented my belief that JPMorgan Chase should not get the gas and fuels tax refunding bonds. I’m proud to see my efforts have gotten the Bond Commission to change its recommendation to Wells Fargo!”
During Thursday’s on-the-record verbal scuffle, Schroder took issue with posting the three-week old letter before Thuirsday's meeting.
“This is what it comes down to with the Attorney General’s office: If I don’t read Twitter, which I don’t, he receives a letter on Oct. 27 and tweets it out before the bond commission meets at 9:00 am in the morning," Schroder said.
"Ladies and gentlemen, members of the bond commission, this is not how I take care of my business,” he said.