Texas Attorney General Ken Paxton defended state laws that punish banks for limiting work with the firearms or fossil-fuel industries, saying that Wall Street should stay out of the political sphere.

“The founders were very fearful about large banks controlling how this country went,” Paxton said in an interview Monday. “It’s part of the tension of democracy that states can push back on the big corporations and the big banks and say, ‘Wait a minute, you guys don’t get to decide what the law is in this country.’”

The firebrand Texas Republican, just weeks after being acquitted in an impeachment trial, has escalated a battle with Wall Street over what he says are policies that don’t align with the state’s conservative culture.

Last month, his office started a review of whether 10 financial companies, including Bank of America Corp. and JPMorgan Chase & Co., violate a state law passed in 2021 that punishes firms for limiting work with the oil and gas industry because of environmental concerns. The latest probe focuses on banks that have signed pledges to reduce greenhouse gas emissions, called net zero commitments.

Those found in violation of the statute are restricted from doing business with the state or its local governments. The inquiry sent shock waves through Texas’ booming municipal bond market where governments raise money for everything from schools to transportation. Several bankers said they were caught off guard by the probe and governments swiftly removed at least two banks from managing debt deals because of the investigation.

Jamie Dimon

The attorney general said he understood the perspective of bankers like JPMorgan Chief Executive Officer Jamie Dimon, who said in an interview with Bloomberg News on Nov. 1 that Texas was putting its business-friendly reputation at risk by targeting banks.

But Paxton said the concern is overblown.

“I don’t have anything against JPMorgan,” he said. “I have to implement the laws that the legislature put in front of me.”

Paxton said there is “no doubt” Texas is business-friendly. But lawmakers have “decided we’re willing to sacrifice a few businesses being here to make sure our state remains free and that large companies and large banks are not dictating the Constitution to us.”

Paxton said he holds no animosity toward Wall Street, but he simply has to enforce the rules.

“I‘m not trying to take on the big banks,” he said. “We want as many banks that want to do business with our state to be here. We just want them to follow the law while they’re doing it.”

Corporate Activism

He wouldn’t comment on exactly when the investigation would be completed, but said his office hopes to have a determination quickly.

Paxton, a prominent ally of former President Donald Trump who sought to help him overturn the 2020 election results, has been among the biggest names nationally in the GOP’s fight against what it sees as corporate activism on issues like abortion or transgender rights.

Paxton plays a powerful role in the state’s public finance industry because his office must sign off on most bond deals. Already, his office determined in January that Citigroup Inc. discriminates against firearms entities, barring the one-time industry powerhouse from working on muni sales from the state or its localities.

The attorney general said he wasn’t concerned about limiting the number of banks that can work with municipal bond issuers, saying that there were plenty of financial institutions willing to replace ones that are forced out.

“There’ll be banks that will do this, and that will be transparent about their policies,” he said. “Some banks are large enough that they can forgo that and go try to find business elsewhere.”

Paxton was impeached by the Texas House of Representatives and suspended from office earlier this year amid corruption accusations tied to an Austin real estate developer, but was ultimately cleared of all charges and returned to office. He is poised to stand trial for securities fraud in April, more than eight years after he was indicted on charges of duping investors in a tech startup.

He dismissed the validity of the charges. “It’s a joke,” he said.

--With assistance from Amanda Albright.