An Oklahoma judge recently issued a permanent injunction against the enforcement of a 2022 state law that banned four investment banks from underwriting municipal bonds. The law also targeted other financial firms for divestment purposes. The judge’s decision was based on the law being deemed unconstitutionally vague and violative of Oklahoma’s Constitutional requirement that pension benefits must be used for the benefit of beneficiaries.
The lawsuit was filed by a state pension recipient against Oklahoma Treasurer Todd Russ. In May, a temporary injunction was issued against the Energy Discrimination Elimination Act, which prohibited state and local government contracts with companies boycotting the fossil fuel industry. The Oklahoma Attorney General has taken over the defense in this case and plans to appeal the judge’s ruling in hopes of overturning it at the Oklahoma Supreme Court.
The state treasurer’s list of “boycotters” includes Barclays, Bank of America, JP Morgan Chase, Wells Fargo, BlackRock, State Street Corp., and Climate First Bank. Wells Fargo resigned as a lead underwriter for a bond deal after being placed on the list, causing a financial shakeup. Additionally, a study revealed that Oklahoma’s law increased municipalities’ borrowing costs by 59 basis points on average.
Efforts to apply the controversial law only to state agencies failed in the Republican-controlled Oklahoma Legislature. Despite passing the Senate, the bill did not gain sufficient support in the House. Similar laws have been enacted in other states, like Louisiana, that target investment banks and financial firms for their policies on fossil fuels or firearms.
Overall, the judge’s decision to issue a permanent injunction against the law highlights the legal and financial consequences of such legislation. The impact on municipalities, investment banks, and state agencies demonstrates the need for clear and constitutionally sound regulations in the financial sector. This case serves as a cautionary tale for lawmakers and stakeholders to consider the broader implications of their actions on the economy and the public welfare.