Using old bank merger guidelines to evaluate the proposed combination of Capital One and Discover “would amount to regulatory malfeasance,” Sen. Elizabeth Warren, D-MA, wrote Wednesday in a letter to leaders at the Federal Reserve and the Office of the Comptroller of the Currency.
Warren, the incoming ranking member of the Senate Banking Committee, recycled language she aimed at the OCC in April, when she accused the agency of being “asleep at the wheel” when it approved New York Community Bank’s acquisition of Flagstar. That transaction, followed shortly by Flagstar’s absorption of assets from the failed Signature Bank, is thought to have contributed to NYCB’s own crisis in January.
Warren urged the Fed and the OCC to use updated bank merger guidelines the Justice Department and Federal Deposit Insurance Corp. have put into effect in the past year.
She blasted the OCC’s acting chief, Michael Hsu, for assurances he made at a September hearing — indicating his agency was “working with both the FDIC, the Fed and the DOJ” on updates that address competition in the way the FDIC does.
As it stands, the OCC in January issued a policy update that ended expedited merger reviews. But Warren argued Wednesday the revamp “primarily enhance[s] the transparency of the OCC’s review — rather than update it to meet the complexity of modern banks.”
The Fed, meanwhile, “has made zero progress” in addressing President Joe Biden’s 2021 executive order calling for updated merger guidelines that prompt “robust scrutiny” of potential combinations, Warren said.
The senator accused both the OCC and the Fed of “recalcitrance [in the] extreme,” adding that the two agencies “must not give [Capital One-Discover] a rubber-stamped approval.”
Capital One on Thursday said it received approval on the Discover acquisition from the Delaware State Bank Commissioner — a development the bank called an “important step toward completion of the merger.”
The companies have continued to tout expectations that the $35.3 billion deal would close early next year. But it still needs sign-off from several agencies.
Merger guidelines, last revised en masse in 1995, have been called outdated — by a Fed governor, no less — as far back as 2022.
In reference to refreshed DOJ and FDIC guidelines Wednesday, Warren on Wednesday concluded that “if [the OCC and Fed] were to apply these principles, it is clear that the merger must be denied.”
Warren and 11 other Democratic lawmakers last month wrote OCC and Fed officials, citing Capital One’s “history” of regulatory missteps as reasoning that the proposed Discover acquisition should be rejected.
