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Flogged on by Florida Gov. Ron DeSantis, state lawmakers in Tallahassee are plowing ahead with a bill this session that is meant to stop banks and investment managers from thinking about things like carbon emissions, worker pay and executive diversity when deciding where to invest money.
Much of the debate on House Bill 3, which comes directly from DeSantis and is being fast-tracked through the Florida House of Representatives, has centered around provisions that would ensure public pension plans and other state-controlled funds cannot consider “environmental, social and governance” standards — ESG — when investing.
But the proposal goes far beyond public investing. The legislation also attempts to exert state control over private banking, too — by threatening banks with financial and legal retaliation if they refuse to lend to a company based on its “business sector.”
And that could help one of the biggest and most politically influential companies in Florida: The GEO Group Inc., the Boca Raton-based operator of for-profit prisons and immigration-detention centers.
DeSantis’ crusade against “woke” banking comes after more than half a dozen of the country’s biggest banks stopped financing GEO and fellow prison operator CoreCivic Inc., amid pressure from criminal-justice reform activists and advocates for migrants seeking asylum in the United States. Though the big banks pulled out of the industry in mid-2019, the aftershocks continue today: GEO stopped paying dividends to investors last year and is still paying down its debt load.
Records show GEO is registered to lobby on HB 3, although it’s not clear how much input the company has had on the legislation. Representatives for GEO did not respond to requests for comment.
But DeSantis has repeatedly cited GEO’s plight while calling on the Legislature to take action.
“All these Wall Street banks cut off the credit to The GEO Group because there were activists who want to abolish police, abolish ICE [U.S. Immigration & Customs Enforcement], that were giving them a lot of blowback for providing that financing,” DeSantis said at press conference in July, standing in front of a banner that read “Government of Laws Not Woke CEOS.”
“A few years ago, GEO Group was de-banked by the major financial institutions in this country,” DeSantis added at another press conference in February, this time speaking from a podium emblazoned with, “Government of Laws Not Woke Politics”. “This was a company that was doing things — contracting with the actual federal government — and you had the banks cut them off and they have to try and find funding elsewhere.”
One of DeSantis’ earliest backers
DeSantis, who is widely expected to run for president, has a lengthy history with GEO and its executives.
GEO was one of the earliest big-dollar donors to DeSantis’ 2018 campaign for governor — back when DeSantis was still seen as an underdog, before former President Donald Trump lifted him to the Republican nomination. Altogether, campaign-finance records show that GEO and its executives donated more than $200,000 to DeSantis during that first campaign. They have also given $1.5 million to the Republican Party of Florida during DeSantis’ tenure as governor.
Emails obtained through public-records requests show that DeSantis’ staff included GEO’s executive chairman on an exclusive list of donors, lobbyists and other supporters to be invited to the governor’s 2020 “State of the State” speech. GEO’s top attorney — a former Senate President who took a job with GEO immediately after leaving the Legislature — was among the VIPs spotted at DeSantis’ second inauguration in January.
The DeSantis administration last year renewed a major contract with GEO. The company made more than $110 million from Florida contracts in 2021, according to investor filings.
Pressuring banks into providing loans
So how would House Bill 3 pressure private banks — and how might it help The GEO Group?
It starts with the fact that Florida has a lot of cash. So do its cities, counties, school districts and sheriff’s offices — along with public agencies ranging from airports to universities.
Those governments have to put their money in banks. And their “public deposits” are a big line of business: Banks are currently holding nearly $40 billion in public deposits from Florida governments, according to data from the state’s Bureau of Collateral Management.
Banks fight hard to hang on to these accounts; the industry is currently lobbying against legislation that would let credit unions in on the public deposits business, too.
A bank that wants to hold a public deposit in Florida must first get qualified by the state’s chief financial officer. The current requirements are relatively basic — the bank must be federally insured, for instance, and it must have a branch in Florida. There are 118 banks on the qualified list right now.
But HB 3 would throw up a thicket of new lending “discrimination” rules for any bank that wants to continue holding public deposits.
For example, a bank would be disqualified from holding public deposits if it canceled or denied service to a customer based on the customer’s “business sector.”
What’s more, a bank would also be disqualified if it refuses to finance a customer based on the customer’s “support of the state or Federal Government in combatting illegal immigration.”
That provision, in particular, appears tailored to protect GEO, whose biggest customer is U.S. Immigration and Customers Enforcement. Contracts with ICE generated more than $1 billion of GEO’s $2.4 billion revenue last year, according to regulatory filings.
Billions of dollars at stake
Take Wells Fargo. It was one of the first big banks to cut ties with GEO in 2019.
Wells Fargo holds more public deposits than any other bank in Florida. It’s currently holding more than $7 billion, according to the Bureau of Collateral Management data.
Bank of America, which also dropped GEO, is holding another $2.5 billion in public deposits.
But the threat to banks goes beyond the potential loss of business.
That’s because the legislation would also require any bank that wants to hold public deposits to certify — under oath — that it is not violating any of the new lending rules. It would also give Florida’s chief financial officer the power to demand internal bank records to make sure they are in compliance. And it would give the state’s attorney general the power to file lawsuits against non-compliant banks.
Florida’s current chief financial officer is Jimmy Patronis, a Republican who has taken $51,000 from GEO since 2018. The state’s current attorney general is Ashley Moody, a Republican who has taken $69,000 from GEO over the same period.
A sledgehammer over small banks
Federal law limits just how far the state of Florida can go when it comes to regulating or punishing big national banks or banks chartered in other states.
But there are no such limits on what the state can do to the 69 banks and 66 credit unions that chartered under Florida law. And HB 3 would swing an even bigger sledgehammer at these smaller institutions.
Under the legislation, the state could revoke the license of any state-chartered bank or credit union that violates the new lending rules — like refusing to provide financing to a company based on its business sector or because of the company’s involvement with immigration enforcement.
It would even expose the bank or credit union to potential fraud litigation brought by the attorney general or any local state attorney in Florida.
A banking Pandora’s box
The banking industry has put up some meek opposition to the legislation so far — though lobbyists are clearly wary of antagonizing DeSantis, who has made fighting all things “woke” a core part of his political identity.
During an appearance before the House Commerce Committee last week, Anthony DiMarco, a lobbyist for the Florida Bankers Association, jokingly referred to himself as “the sacrificial lamb” for the industry.
But DiMarco also warned lawmakers that HB 3 would create a compliance nightmare for banks, especially small community banks. And he pointed out that banks often have non-ideological reasons for choosing to serve some industries but not others — sometimes it’s as simple as carving out a specialized niche.
The lobbyist also warned Republicans that they may be opening something of a banking Pandora’s Box.
“Our position is, we should, basically, be able to bank who we think we should be able to bank — and not be told who to bank and not told who not to bank,” DiMarco said. “Because there’s a little different take going on in Washington, D.C., than there is in Tallahassee. And you’ll see that in other states. Some blue states are pushing back on some of this.”
The warnings have fallen on deaf areas, at least so far. Though the Florida Legislature is only two weeks into its annual two-month session, House Bill 3 is already teed up for a vote in the full House of Representatives.
The Faustian bargain between the GOP and its voters is: we'll help our rich supporters get richer via regressive tax policies, deregulation, and hypocritical veneration of the free market, and we'll feed red meat to our poor voters by fighting the culture war on every front.
For as allegedly "smart" as DeSantis is, I don't think he understands his role, and doesn't seem to realize he's not supposed to interfere with the money making machinery. I'm cautiously optimistic he's going to blow himself up when he hits the national stage, and I'm not known for my optimism. Fingers crossed.
H.L. Mencken was quoted as saying “A democracy is where the middle class knows what it wants and gets it, good and hard”.
The joke is on Florida in so many ways but it is deserved nonetheless. A few years back the legislature passed regulations that limited how much insurance companies could charge in premiums. The result was that major insurers quit the state and those that are left are increasing premiums over 50% year over year. Now one can say, the insurers deserve it but the reality is changing weather patterns are increasing the frequency and severity of storms and thus claims. Anyway chasing banks out only increases costs for the Florida residents, Texas is finding that out as well. The voters are too stupid to recognize when their pockets are being picked so I say “let ‘em have it”. Its what I call the hidden income tax of a tax free state.