Investing is generally understood to be about seeking to preserve and grow wealth. But the Texas government seems to be making an exception to that understanding in buying the bonds of the Israel government and enabling other government entities in Texas to do so as well.
In February, Acting Comptroller Kelly Hancock touted in a press release that the state government was doubling its holdings of Israel bonds “from approximately $140 million to $280 million, marking the largest one-time investment in Israel bonds in Texas history and elevating the state from the sixth-largest to the second-largest U.S. state investor in these securities.”
That is a significant investment action. How did Hancock describe that the action was taken to best preserve and grow the wealth held by state government? He did not. Instead, Hancock provided a political justification in the press release:
‘Texas proudly stands with Israel,’ Hancock said. ‘This expanded investment reinforces our long-standing relationship and shared commitment to faith, freedom and economic opportunity. Texas and Israel have built a partnership that stretches beyond finance, and this step reflects both our solidarity and our belief in what we can accomplish together.’
This sort of reasoning does not bode well of the finances of the state. Liking a government is not a valid investment reason for buying its bonds. Is Hancock next going to “invest” in truckloads of puppies because he thinks they are adorable?
The state government, in addition to piling up Israel bonds, has also decreed that government entities in Texas can buy Israel government bonds but are forbidden from buying bonds of any other foreign government. This special permission to purchase Israel government bonds is provided in chapter 2256 of the Texas Government Code (the Public Funds Investment Act). There the listed “authorized investments” for government entities in Texas include “bonds issued, assumed, or guaranteed by the State of Israel” but no similar investments related to any other foreign government.
Is there any reason to think that the bonds of Israel are uniquely good investments when compared to the bonds of every other foreign nation? It seems the answer to that question is “no.” Consider that in May of 2025 Daniel Liberto reported at Investopedia that then “10 countries had perfect credit ratings from all three rating companies” — Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings. Israel did not make the list. Yet, Israel’s bonds are determined by the Texas government to be an acceptable investment while these other bond options that have been rated safer are verboten.
It looks like the Texas government, through its preferred treatment of Israel bonds, is ensuring that politics triumphs over sound investing.
