Some companies have environmental, social and governance policies. Some banks, for example, have anti-discrimination policies. They won’t do business with companies and individuals that have bad records on human rights.
The Texas Legislature got into a fit that some big financial institutions on Wall Street were discriminating against the industries that produce guns and gas. And so legislators passed a law that said financial institutions that had such policies couldn’t do business in Texas.
The problem is that Texas has thousands of cities, school districts and other local governments that issue bonds for capital improvements. The more customers you have bidding on those bonds, the better interest rate you’re likely to get. If you’re selling bonds and you chase one-third of the bidders away, you’re likely to have to pay a higher rate.
A couple of researchers got curious and estimated how much Texans are paying in higher costs: $303 million to $532 million.
It would be understandable if Texas’ leaders had got in a fit with big banks on the East Coast and punished them. Instead, Texas’ leaders got in a fit with banks of the East Coast and punished us. They got angry and took it out on the taxpayers they represent.
It’s hard to explain to outsiders the ideologies of Texas politics, which are zany enough. But it’s harder to explain the prevalence of bad thinking. You can find inexplicable cases at every level of government. It’s been that way since I started watching 50 years ago.
• Source: The study was done by Daniel G. Garrett, a professor at the University of Pennsylvania’s Wharton School, and Ivan Ivanov, an economist with the Board of Governors of the Federal Reserve System. A good summary is here:
https://knowledge.wharton.upenn.edu/article/texas-fought-against-esg-heres-what-it-cost/
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