Editor's Note: The following is Their Town, a column of opinion and analysis.
Last week, the electronic billboard peeking over I-10 East near Northwest Loop 410 read: “IBC Supports NAFTA.”
Which is true. The Laredo-based bank’s CEO and chairman, Dennis Nixon, fought for passage of the sweeping trade agreement with Mexico and Canada in the early 1990s, and he’s been one of its strongest defenders ever since.
But the full story of International Commerce Bank’s relationship with NAFTA would require a second billboard, one that read: “But IBC’s Dennis Nixon also supports President Trump, who considers NAFTA one of the world’s worst trade deals and has repeatedly threatened to walk away from it.”
A third billboard might be helpful, too: “Trump has also demonized immigrants from Mexico, calling them rapists, drug dealers, the worst sort of people, and threatened to shut down the federal government if he doesn’t get his border wall. His attacks surely don’t sit well with many of IBC’s Latino customers.”
A little more than two years ago, after Trump had effectively clinched the Republican nomination for president by winning the Indiana primary, Nixon and San Antonio developer and former UT Regent Gene Powell co-hosted a fundraiser for the candidate at Oak Hills Country Club.
Powell’s involvement barely caused a murmur. But Nixon – that looked bizarre to anyone familiar with his bank but not his political agenda.
The following is an excerpt from Nixon’s fundraising letter that, at first glance, looked like it was for Trump, but was actually against Democratic nominee Hillary Clinton:
“First, we will NOT get the regulatory relief we need to get our economy moving again, and second, we will get MORE burdensome regulations, MORE bad decisions from a liberal Supreme Court and MORE spending on social programs, driving us deeper into debt.”
At the time, most of the political commentariat assumed Trump’s racism, misogyny, overall obliviousness and lack of discipline would lead the GOP to a spectacular disaster on Election Day. He certainly hadn’t given trade-minded business leaders like Nixon much to like. And by that stage in the race for president – after a year of Trump’s simplistic attacks on U.S. trade deals and commercial dealings with other countries – nobody had any real reason to believe the candidate was faking it to cheat blue-collar workers or the economically insecure middle class out of their votes. The smart thing was to take Trump at his word, which, granted, seemed like something only a chump would do. But he really does hate NAFTA.
Nixon’s solution? Give Trump a good talking-to about the value of free trade at the June 17, 2016, fundraiser in San Antonio. The controversy over his support for Trump was intense enough that the company issued a letter before the event saying he would take a stand on free trade.
The Texas Tribune
picked it up from there, reporting:
“Mr. Trump, we must support trade, but I agree we need fair trade,” Nixon said, according to an audio recording of the event obtained by the Texas Tribune
. “And here in South Texas, NAFTA meets the definition,” Nixon added, referring to the North American Free Trade Agreement that Trump has railed against throughout his campaign.
Obviously, Nixon’s lecture didn’t stick. In fact, the impact didn’t even make the trip from San Antonio to The Woodlands where Trump had another fundraiser later that day.
Again from the Texas Tribune
He attacked Democratic rival Hillary Clinton’s husband, former President Bill Clinton, for signing NAFTA into law, calling it “maybe the worst economic development transaction ever signed in the history of our country.”
He also dramatically imitated someone questioning his conservative credentials due to his trade positions.
“’You are not a conservative because you don’t believe in free trade?’” Trump said, switching back to his normal voice. “Who cares?”
Nixon did not respond to the Current
’s interview request. But in an interview published Monday in the San Antonio Express-News
, he explained why he threw his support behind Trump in 2016.
“The choices I made were that I agreed with probably 70 or 80 percent of what he’s doing and I agree with 70 or 80 percent of what he’s doing now,” he told the Express-News
. “We have differences. I would suspect that in any kind of political campaign you have differences. I had about a 90 percent difference with Obama and Hillary, so I have to narrow the field of where my differences are.
“I’ve continued to work and tried to influence change in [Trump’s] thinking and his administration’s thinking on my issues. We’re big NAFTA [supporters], we’re big free traders.”
Another way of looking at it is that executives like Nixon who supported Trump – business people who hated overweening regulations like their guy, but also loved free trade – failed to understand how seriously injured his base felt by the globalized economy. Many of Bernie Sanders’ supporters felt the same way.
Trump’s business supporters had largely benefited from unfettered trade. Their customers and employees had not, and they were the ones Trump courted.
The Elusive Nixon
International Bancshares Corp., the holding company for IBC Bank and subsidiaries, may be headquartered in Laredo, but Nixon is a power in San Antonio’s political circles. Finding Nixon schmoozing at fundraisers or other candidate events, however, is as rare as chupacabra sightings. A longtime GOP campaign operative said he’s never seen Nixon on the local scene. “Dennis is kind of an elusive figure,” he said. “He’s shied away from the lower levels of politics… I’ve never met him.”
Nixon was one of the business leaders who signed a letter urging Mayor Ron Nirenberg to reconsider his opposition to bidding on the 2020 Republican National Convention three months ago, according to the Rivard Report. The other signatories were billionaire B.J. “Red” McCombs, lobbyist and former state Sen. John Montford and Eddie Aldrete, IBC’s senior vice president in San Antonio. Yet no one I spoke with for this story recalled Nixon participating in any of the meetings to advocate for the convention.
He’s a staunch Republican, and an early and loyal supporter of Congressman Will Hurd, who faces a stiff challenge from San Antonio Democrat Gina Ortiz Jones in his border district.
“I’d classify him as a big player in the GOP, especially when it comes to financial and immigration issues,” Republican County Commissioner Kevin Wolff said. “He’s very direct, which can be off-putting to some folks. But I actually appreciate that.”
Nixon contributed $36,100 to the Trump Victory political action committee in June 2016 after earlier giving $2,700 each to GOP presidential candidates he apparently preferred over Trump – first Ohio Gov. John Kasich, then Florida Sen. Marco Rubio, according to Federal Election Commission records.
Since Trump took office, Nixon has contributed $33,900 to the Republican National Committee, $5,000 to the National Republican Senatorial Committee and $5,000 to Vice President Mike Pence’s leadership PAC, the Great America Committee.
However, Nixon is also pragmatic, writing checks to business-friendly Democratic lawmakers on the border as well as GOP candidates and incumbents.
County Judge Nelson Wolff, a Democrat, knows Nixon from the early 1990s when the banker was cheerleading the effort to pass NAFTA and Wolff lorded over City Hall as mayor. After he left office in 1995 because of term limits, IBC asked him to serve on the board of its San Antonio bank – a seat he still holds despite his position as county government’s highest elected official. To avoid conflicts, he said, bank officials agreed not to seek county business.
“He’s a very strong person, and he’s very outspoken about what he believes in,” Wolff said, mentioning free trade and a reasonable, non-draconian immigration policy. “It was Dennis’ position that he could change Donald Trump’s mind. I’m not sure how well that’s worked out.”
Feeding on NAFTA
Nixon built IBC into the biggest bank rooted on the Texas-Mexico border, with $12 billion in assets as of March 31, on the strength of NAFTA. The bank does business mostly in South, Central and Southeast Texas, including San Antonio, Austin and Houston, but also reaches into the Metroplex and Oklahoma. IBC earned a profit of $157 million in 2017.
Border cities haven’t achieved the same degree of success under NAFTA as their biggest regional banker, but they’ve benefitted, too. In a 2016 report, the Federal Reserve Bank of Dallas concluded that McAllen, Laredo, Brownsville and El Paso offset initial factory job losses caused by the trade agreement with new jobs, many of them generated by foreign investors. They’ve also been driving down their unemployment rates and making progress in closing yawning income gaps with the rest of the country.
“Texas border cities have been largely able to adjust to trade, taking advantage of geographic location to exploit NAFTA-derived opportunities and growth in northern Mexico,” the report’s author said.
Steve Ahlenius, president of the McAllen Chamber of Commerce, gives Nixon a lot of credit for border cities’ gains under NAFTA. “IBC has been at the forefront of promoting trade with Mexico,” he said. “Dennis Nixon understood the dynamics and what it means for the region.”
Bluster and Consequences
So far, there’s been only upside for IBC from Trump’s handling of the economy and his push to slash regulations. The bank’s profits have continued to climb, and its stock price zoomed from $29.90 on October 31, 2016, a week before Trump’s election, to $44.60 on Friday, July 27. That was just a quarter off its all-time high, also reached in July.
Juiced by the massive tax cuts championed by Trump – which benefit the rich far more than anybody else – the government reported a growth spurt of four percent in the nation’s gross domestic product, also on July 27.
Nixon and other bankers have also gotten at least a down payment on what they’d wanted most from a Trump presidency – relief from the Dodd-Frank financial reform act on banks, passed amid the wreckage of the 2008 financial crisis. The rules required banks to increase their capital reserves to guard against insolvency, and to undergo rigorous “stress tests.” In May, Trump signed a bill into law that helps small and midsize banks such as IBC by relaxing reporting requirements for mortgage loan data and freeing many of them from stress-testing. The law, which drew rare bipartisan support in Congress, also changed the threshold for lenders considered institutions that are “too big to fail,” crucial to the country’s financial system – and therefore subject to stricter oversight – from $50 billion in assets to $250 billion.
Bankers, including Nixon, have been complaining about the cost of complying with Dodd-Frank rules since they became law under President Barack Obama – even before then, in fact. But the regulations clearly haven’t derailed IBC’s success.
One of the keys to that success is trade with Mexico. A recent IBC filing with the Securities and Exchange Commission makes clear how important Mexico is to its business.
“The Company is very active in facilitating trade along the United States border with Mexico. The Company does a large amount of business with customers domiciled in Mexico. Deposits from persons and entities domiciled in Mexico comprise a large and stable portion of the deposit base of the Company’s bank subsidiaries. The Company also serves the growing Hispanic population through the Company’s facilities located throughout South, Central and Southeast Texas and the State of Oklahoma.”
That passage is boilerplate, appearing in every quarterly filing IBC makes to the Securities and Exchange Commission. It’s boilerplate because that’s how important business with Mexico and Hispanic customers are to IBC’s prospects.
IBC and its investors should be nervous.
Trump’s obsessive push for a border wall, his harsh “zero-tolerance” policy on illegal immigration and the trash he’s talked about Mexican immigrants, not to mention his decision to re-negotiate NAFTA – well, it turns out these might wind up hurting the border economy.
In McAllen, Ahlenius said he’s seeing fewer Mexicans crossing the border legally to shop or sight-see. And companies north of the border are sitting tight, waiting for some hint about Trump’s real objective for trade with Mexico.
The election of lefty firebrand Andrés Manuel López Obrador as Mexico’s next president is another worry among companies trading with our neighbor to the south. But at least Obrador has pressed Trump to restart NAFTA negotiations.
“When there’s that much uncertainty, it causes a lot of people to step back, to reconsider their investments,” Ahlenius said. Referring to Trump’s wall talk and his immigration crackdown, he added: “It has our attention. We’re seeing the impact of that rhetoric – people not wanting to [cross the border]. It’s reverberating through our retail sector.”
Nixon and many of Trump’s other business supporters may be in for a bruising lesson on the law of unintended consequences.
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