Outside San Antonio this month, a veteran of Texas politics got so upset about Wall Street’s retreat from fossil fuels that he compared the oil industry’s fight for funding to the civil rights struggle.
In Dallas, a hedge fund manager trading junk bonds on his iPhone lamented his upcoming move to the posh Highland Park neighborhood, fearing locals might brand him an outsider even though he relocated from New York years ago.
And at an Austin diner, a finance executive whose grandfather was governor hoped for compromise between Wall Street and the Lone Star State, but warned it may get worse before it gets better.
Welcome to the tense battle brewing between Big Finance and Texas. Just a few months ago, drawn by the promise of low taxes and light regulation, some of the largest banks and asset managers in the U.S. were ramping up their flight from the coasts.
Then Governor Greg Abbott signed a law banning state investments in firms that cut ties to oil and gas and another blocking local governments from working with banks that limit their lending to gun companies. That halted business for some top municipal-bond underwriters. JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc. have all stopped muni underwriting in the state, at least for now.
But what’s happening in Texas isn’t just about muni bonds or a Republican governor leaning to the hard right in a bid to win reelection next November. It’s a broader conflict between a state that would be among the world’s top economies if it were its own country and an industry whose leaders have begun to raise their voices on social issues from racial equity to climate change while pledging to consider stakeholders besides investors.
Interviews with more than a dozen bankers, traders and investors suggest that when Texas decides banks have gone too far, it presages a bigger struggle over corporate power and the reach of Wall Street’s influence.
“This is much bigger than the municipal bond business,” said Phil Gramm, a former Republican U.S. senator from Texas. “This is the beginning of telling Wall Street that if you’re going to discriminate due to your fealty to special interest groups, you’re going to have to pay for it.”
Gramm helped write the law that allowed for the creation of Citigroup and other Wall Street giants, and later was vice chairman of UBS AG’s investment bank. He prefers to use what he calls the language of the civil rights movement, comparing an oil driller’s ability to borrow funds to the right to sit at segregated lunch counters: “Discrimination is discrimination.”
Until recently, the finance industry’s ties to Texas had never looked stronger. Goldman Sachs has been on the hunt for a new Dallas-area campus that could be its biggest in the U.S. outside Manhattan. Charles Schwab Corp. built new headquarters in the wealthy suburb of Westlake. And Vanguard Group announced a new Dallas-Fort Worth office not too far from fresh space for hedge fund Canyon Partners.
Inside an Austin restaurant called Cisco’s, where a wall of luminaries includes a photo of former governor Bill Clements, his grandson George Seay ate huevos rancheros with biscuits and gravy.
Seay, the founder of investment firm Annandale Capital, said it was “a big, big move” when JPMorgan boss Jamie Dimon and other top executives said in 2019 they’re redefining the purpose of corporations to benefit workers and communities, not just shareholders.