Washington Sets Sights on the Gun Industry Amid Tumble
(Bloomberg) -- Washington turned its attention to the firearms industry this week, as politicians discuss a ban on bump stocks and a new bill that would regulate the industry’s lenders.
President Donald Trump on Monday said a ban on the specialty gun stocks is imminent. The accessory, which was linked to last year’s mass shooting at a Las Vegas music festival, allows a semi-automatic weapon to fire at the rate of an automatic weapon. “We are knocking out bump stocks,” the president said. A retailer of the devices sent a marketing email following the statements that claimed their inventory was running low. “When they’re gone, they’re gone,” the email warned.
Republican Senator John Kennedy of Louisiana followed on Tuesday, introducing legislation prohibiting the federal government from rewarding contracts to banks that opt out of doing business with law-abiding companies because of social concerns.
In a committee hearing, Kennedy specifically called out Citigroup Inc. and Bank of America Corp. for changing their policies on doing business with the firearms industry following the mass shooting in Parkland, Florida, earlier this year. Bank of America stopped lending to companies that manufacture military-style firearms for civilian use, and Citigroup imposed restrictions on companies selling firearms that use the bank to issue store credit cards and for lending. Kennedy argued that the banks were “effectively acting as a private regulator” when they changed their policies. Bank of America declined to comment.
“Citi adopted this policy because we believe it is a positive and balanced step to promote gun safety without undermining free markets or Second Amendment rights,” a Citigroup spokesperson said in a statement. “It is disappointing that some are attempting to politicize the competitive process through which we bid to provide critical financial services to the government as a result.”
The bond commission in Kennedy’s home state, Louisiana, voted in August to ban Bank of America Corp. and Citigroup Inc. from a bond sale because of the banks' "restrictive gun policies."
“Citigroup and Bank of America have decided to make banking a red versus blue issue by trampling on the Second Amendment rights of small business owners,” Kennedy said in a statement. “And if additional big consumer banks come out with similar anti-gun policies, it will get harder and harder for businesses in Louisiana and elsewhere to find banking services.” He previously criticized the two banks during a Consumer Financial Protection Bureau hearing in April.
In some cases, state and local governments have supported such moves by lenders. Earlier this year, Chicago Mayor Rahm Emanuel proposed using the city’s business to push for stricter gun controls by limiting work with Wall Street firms that didn’t cut ties with companies that sold firearms to people under the age of 21 or dealt in high-capacity magazines.
As Kennedy aims to defend the firearms industry from social pressure, gun maker American Outdoor Brands Corp. (formerly known as Smith & Wesson) is facing pressure from its own shareholders. Investors recently voted in favor of a proposal requiring the company to prepare a report on gun safety. Chief Executive Officer P. James Debney called the proposal “politically motivated.” Shareholders of gunmaker Sturm, Ruger & Co voted in favor of a similar report earlier this year.
The gun industry has had its up and downs recently. In late summer, there was stronger-than-expected retail activity, and both Smith & Wesson and Ruger boasted impressive earnings. But data released this week by the FBI’s National Instant Criminal Background Check System, a barometer for gun sales, showed that September’s sales had slipped by more than 9 percent, compared to this time last year. It was the slowest September since 2011. The data was “slightly below” expectations, according to KeyBanc Capital Markets.
Cowen analyst Cai von Rumohr was more blunt: “NICS checks disappoint again,” he wrote.
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