December 19, 2024

Warren Slams Fed, OCC As “Asleep at the Wheel” on Necessary Bank Merger Guideline Updates

As Capital One-Discover deal receives state regulatory approval, Sen. Warren presses agencies to make needed updates to merger framework

“The Fed and the OCC’s failures to act to meaningfully strengthen our nation’s bank merger review framework threaten the stability of our economy and the livelihoods of working families.”

Text of Letter (PDF)

Washington, D.C. — U.S. Senator Elizabeth Warren (D-Mass.) wrote to Federal Reserve (Fed) Chair Jerome Powell, Fed Vice Chair Michael Barr, and Acting Comptroller for the Office of the Comptroller of the Currency (OCC) Michael Hsu, slamming the agencies for being “asleep at the wheel” in following their mandate to prevent dangerous and anticompetitive bank mergers. The letter comes as Capital One reportedly received state regulatory approval to buy Discover, moving one step closer to completion of the dangerous merger. Senator Warren demanded that the agencies update and strengthen their bank merger policy guidelines and use these new guidelines to scrutinize the deal.

A 2021 Executive Order signed by President Biden directed the Department of Justice (DOJ), the Federal Deposit Insurance Corporation (FDIC), the OCC, and the Fed to “update guidelines on banking mergers to provide more robust scrutiny of mergers.” In December 2023, the DOJ and the Federal Trade Commission (FTC) released updated comprehensive merger guidelines. This year, the FDIC followed suit — but the Fed and the OCC have not taken similarly strong action.

“The Fed and the OCC’s failures to act to meaningfully strengthen our nation’s bank merger review framework threaten the stability of our economy and the livelihoods of working families,” said Senator Warren. “In particular, using a set of weak, decades-old rules to evaluate the massive Capital One-Discover deal, which was announced in February and would combine two of the nation’s largest credit card companies, would amount to regulatory malfeasance.”

In February, Senator Warren wrote that Capital One’s acquisition of Discover “will be one of the most important tests of the efforts to prevent harmful bank consolidation since the release of President Biden’s Executive Order.” The deal would create the nation’s sixth-largest bank with approximately $624 billion in assets and make Capital One the nation’s largest credit card issuer, with over $200 billion in outstanding credit card loans.

“Approving a deal this complex and with such serious competition and consolidation risks could lead to catastrophic outcomes for our financial system and consumers and would set a dangerous precedent,” said Senator Warren.

In September 2024, the OCC announced a final rule that failed to address the agency’s consideration of the competitive consequences of a merger — even though the Bank Merger Act specifically prohibits the OCC from approving any mergers that would substantially lessen competition or create a monopoly. The Fed is 3 years behind on President Biden’s Executive Order and, in the meantime, has approved problematic deals such as Silicon Valley Bank’s merger with Boston Private. 

“To protect consumers and our financial stability, I urge the Fed and the OCC to update and strengthen your bank merger policy guidelines and use these new guidelines to closely scrutinize the Capital One-Discover deal. If you apply these principles, it is clear that the merger must be denied,” Senator Warren concluded.

Senator Warren has led the fight to hold banking regulators accountable to establishing and enforcing guardrails around the banking industry and preventing harmful bank mergers to protect the financial system, economy, and consumers:

  • In September 2024, Senator Warren wrote to the OCC and the Fed with renewed concern that the OCC and the Fed could allow New York Community Bank to escape regulatory oversight despite “systemic failings” in the bank’s operation and management.
  • In April 2024, Senators Warren and Blumenthal probed the OCC for its regulatory failures amid NYCB’s financial spiral. 
  • In March 2024, Senator Elizabeth Warren (D-Mass.) published an op-ed in the Wall Street Journal calling on federal regulators to block Capital One’s merger with Discover. 
  • In March 2024, a year after the collapse of Silicon Valley Bank, Senator Warren sent a letter to three key banking regulators: Michael Barr, Vice Chair for Supervision of the Federal Reserve, Martin Gruenberg, Chair of the Federal Deposit Insurance Corporation, and Acting Comptroller Hsu, seeking an update on their progress in delivering on their public commitments to strengthen regulatory standards for banks with assets of $100 billion or more. 
  • In February 2024, Senator Warren led 12 lawmakers urging the OCC and the Federal Reserve to block Capital One’s plan to acquire Discover Financial Services. Their letter also expressed concerns with the OCC’s proposed policy statement regarding merger approvals as essentially codifying a permissive approach.
  • In December 2023, Senator Warren led 6 senators in a letter to Acting Comptroller Hsu, calling on OCC to allow states to move forward with their efforts to protect consumers from harmful bank practices. The senators criticized the OCC for overstepping its preemption authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which it used to block tough, state-level consumer protections.
  • In August 2023, chairing a hearing of the Senate Banking, Housing, and Urban Affairs Committee Subcommittee on Economic Policy, Senator Warren highlighted the need for regulators to implement the strongest version of bank merger review guidelines in order to ensure stability in the financial system. 
  • In June 2023, Senator Warren sent a letter to Assistant Attorney General Jonathan Kanter, Federal Deposit Investment Corporation Chairman Gruenberg, Acting Comptroller of the Currency Hsu, Federal Reserve Vice Chair for Supervision Michael Barr, and Treasury Secretary Janet Yellen, urging regulators to promote greater competition in the banking sector by toughening their stances on bank mergers and strengthening bank merger review guidelines.
  • In May 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren questioned Acting Comptroller Hsu on his decision to approve JPMorgan Chase’s purchase of First Republic Bank after its collapse. This merger allowed a large, poorly supervised bank to be swallowed by America’s largest bank, making it $200 billion larger than it was before.
  • In May 2023, Senator Warren sent a letter to Acting Comptroller Hsu and FDIC Chair Gruenberg, questioning the terms of the sale of First Republic Bank to JP Morgan Chase and the rationale behind the OCC and FDIC’s approval of the deal. 
  • In December 2022, Senators Warren and Tina Smith (D-Minn.) sent letters to three key banking regulators: the Federal Reserve, FDIC, and the OCC, raising concerns about the ties between the banking industry and crypto firms following FTX’s bankruptcy. The senators asked each regulator how they assessed the banking system’s exposure to crypto risks. 
  • In December 2022, Senator Warren and Representative Ilhan Omar (D-Minn.) sent a letter to the heads of all U.S. banking regulators, including Acting Comptroller Hsu, calling on them to improve banking access for immigrant communities and communities of color.  
  • In August 2022, Senators Warren, Dick Durbin (D-Ill.), Whitehouse, and Sanders sent a letter to the OCC, calling on it to rescind the previously issued cryptocurrency guidance and replace it with more comprehensive guidance, in coordination with other prudential regulators. 
  • In September 2021, Senator Warren and Representative Jesús “Chuy” García (D-Ill.) reintroduced the Bank Merger Review Modernization Act, which would restrict harmful consolidation in the banking industry and protect consumers and the financial system from “Too Big to Fail” institutions, like those that caused the 2008 financial crisis.

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