Earlier today, tjlord published Citigroup adopts bump stock ban unilaterally - interwebs explode in outrage that is a take on the gun nuts’ response to Citigroup’s announcement that it will no longer conduct business with customers dealing in guns without adherence to certain rules. While the gun junkies’ reactions are interesting, understanding the import of this decision is much more important, especially for Kossacks.
Last month, Andrew Sorkin wrote an article in the NYT, How Banks Could Control Gun Sales if Washington Won't; however, since I don’t have a paid subscription to the NYT, I’ll refer readers to Business Insider’s report on the article. Today we witnessed the first move by Citigroup to take some control over the gun business.
Here is the headliner take-away the media and consumers have reacted to on first presentation of that announcement.
[The policy] prohibits the sale of firearms to customers who have not passed a background check or who are younger than 21. It also bars the sale of bump stocks and high-capacity magazines. — CNBC
Fair enough — it’s clear why the NRA and its adherents are upset.
But here is why liberals who support gun controls and want to see the unfettered ability of virtually anyone who is vertical to buy any weapon or ammunition with virtually no requirement than the ability to pay should rejoice. Here is the teeth behind the smile (italics, bold, numbering are mine).
It would apply to 1) clients who offer credit cards backed by Citigroup or 2) borrow money, 3) use banking services or 4) raise capital through the company.
Here are the reasons these rules are HUGE.
First, because one of the world’s largest banks has engaged in a political act to oppose unfettered gun purchases. This is not a business decision, this is not being done to the benefit of share holders’ returns, this is not about Citigroup’s quarterly report or annual bottom line.
More significant, the policy touches nearly ALL ASPECTS of banking, beyond mere use of credit cards to make purchases. Citi is insisting it will make no loans to clients who don’t adhere to their policy. Number 3 above implies restrictions apply to customers who might wish to write a check on a Citi account to make a gun purchase. It implies that clients who are simply passing funds through must comply. But we’re also talking restrictions on big business clients — corporations — when talking about “raising capital,” not merely individuals like you and me pulling out our plastic or our checkbook. That means if you’re a retailer that does not imitate and comply with Citi’s gun restriction rules, it won’t lend to you, it won’t process your transactions, and it won’t let you use their money to establish or grow your business.
Second, Citi has thrown down an ethical gauntlet at the feet of its mega-bank competitors like Goldman-Sachs. Consider, G-S only three weeks ago, in the wake of the Douglas school assassinations, made a financial (and ethical) choice favoring the continued unfettered and unregulated sale of guns, when compared to what it could have done — beat Citi to the punch and set a moral as well as financial standard in its business practices.
Goldman-Sachs’ private equity arm did not divest it’s holdings from a 2017 transaction in which it helped to finance. . .
. . .Bass Pro Shops' roughly $4 billion purchase of hunting and sporting good retail rival Cabela's. The bank contributed approximately $1.8 billion in preferred equity to the deal. It was the largest investment of the bank's first new private equity fund since the financial crisis. — CNBC
In spite of it’s relatively small loan, only issued a statement expressing sadness at the mass killing of students and these words, “We are in touch with management at Bass Pro/Cabela's and know they are deeply concerned and focused as well." Focused on what, one might ask? Bass is highly dependent on the sale of guns as the staple of its retail revenue. And outdoor products, including guns and their accessories make up 50% of Cabela’s, and it still sells the AR-15. In spite of a corporate policy that forbids investing in gun manufacturers, it says nothing about gun retailers.
Further, G-S remained silent after the Las Vegas massacre. However. . .
. . .though [it] did provide a comment to Axios about its previous investment in SureFire, a high-capacity magazine that TMZ alleged was used in the massacre. (Goldman said SureFire moved into magazines after its investment, against its wishes. Its stake in the company is currently for sale, a source familiar with the matter tells CNBC.)
Making the decision to do the Bass/Cabela deal required sign-off by the most senior of G-S staff, and consultation with the firm’s lawyers before the deal could be done. The deal was done.
Lastly, since the declaration by Citigroup, doing investment deals even with gun retailers, will be more difficult for the mega-banks to participate in them. The reputational headlines could outweigh the profits from loans that support retailers. In other words, shareholders will be inclined to favor restrictive policies. This could be even more far-reaching in effecting change through governmental action than the efforts of conscientious lobbyists who have to contend against the ultra-powerful pro-unrestricted gun rights of the NRA lobbyists. I believe the money put in play during elections by the financial interests and their 1%-type investors just might outweigh the more paltry sums the NRA raises from its members to pass along to politicians who favor their wants. Especially in view of the ongoing scandal the Trump-Russia investigation has burgeoned into that now involves the NRA.
We will have to see if one of the world’s foremost mega-banks decision to place restrictions on clients who are involved in any way with the manufacture, sale, and purchase of guns influences other Wall Street giants to follow in their footsteps, and Goldman-Sachs to change their present policy. We will have to wait to see if bankers, retailers, and consumers become more vocal about whose side they’re on in the battle to curtail unrestricted gun access. We will have to wait to see what the interim election and the 2020 election tell us. We will have to wait to see what further outcomes this Saturday’s “March for Life” and other activist protests bode.
I’m betting Citigroup’s stand will effect a similar stand by Morgan-Stanley and other mega-banks and produce a cultural evolution among them that favors gun control and opposes the extremist desires of the NRA for continued unfettered gun access in our society. And I’m betting the pressure will mount on lawmakers to reject their fears, dissemble courage, and act at long last before another incident turns time into too late to recover a semblance of honor and ethics among their numbers.