The fierce competition in major municipal markets like Texas may mute the impact on borrowing costs there, but that may not be the case in states where issuance is less and fewer banks are active.
In Arizona, banks may have less incentive to seek underwriting business should the bill become law, because muni issuance there is relatively small, Hickman said. So the turmoil in that market could be longer and severe, he said.
‘Howl’ Predicted
In Ohio, the biggest issuer among the six states, the bill has over a dozen Republican sponsors in the GOP-controlled legislature. Its sponsor, Scott Wiggam, didn’t respond to multiple requests for comment. He wrote an opinion piece in October promoting the legislation, saying big banks would “howl” about it.
“We don’t like this type of government interference no matter what side it’s coming from,” said Don Boyd, a lobbyist with the Ohio Bankers League. “It’s government trying to dictate who we can and cannot do business with.”
A legislative research arm warned that a court could overturn the measure because it could impede local governments’ power to self-rule.
Still, the movement is seeking to create a “chilling effect” on banks’ efforts to incorporate environmental and social risks in their policies, said Ivan Frishberg, chief sustainability officer for Amalgamated Financial Corp.
“This is creating a risk internally that impacts some pretty important business lines for these larger institutions,” he said. “They’ve found a way to go after something that’s really significant.”
--With assistance from Christopher Cannon.
This article was provided by Bloomberg News.