U.S. Rep. Maxine Waters (D-CA), chair of the House Committee on Financial Services, commended President Joe Biden for his executive order encouraging regulators and the Department of Justice to examine bank merger practices.
“I am very pleased that President Biden took the important step of encouraging the Department of Justice and relevant regulators to robustly scrutinize bank mergers — something I urged the President to do shortly after the election,” Waters wrote to Federal Reserve Board Chair Jerome Powell. “The Federal Reserve’s bank merger review guidelines have not been updated since 1995. Yet as the President’s executive order makes clear, banking industry consolidation has increased considerably since then, with thousands of branch closures, and harmful repercussions for consumers, small businesses, and communities of color.”
Biden’s July 9 executive order encourages the DOJ and banking regulators — the Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency — to Encourages DOJ and the agencies responsible for banking (the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency) to update guidelines on banking mergers to provide more robust scrutiny of mergers.
The executive order said more than 10,000 banks in the United States have closed over the years – more than 70 percent – with communities of color disproportionately affected. Many of these closures stem from mergers and acquisitions. The EO said federal agencies have not formally denied a bank merger application in more than 15 years.
This level of consolidation, the executive order said, raises costs for consumers, restricts credit for small businesses, and hurts low-income communities.
“The Fed should review its outdated bank merger guidelines and carefully scrutinize concentration among large regional banks, especially in light of recent deregulation among that same group of banks, and the significant threats that concentration poses to our economy coming out of the pandemic,” Waters said. “In recent years, we have seen major consolidation among large banks make markets less competitive, from Atlanta, Georgia to Traverse City, Michigan, as well as acquisitions by global systemically important banks that undermine financial stability. Unless the Fed updates the factors it takes into account when evaluating mergers to reflect the transformation in the financial sector that has occurred since 1995, it will not be able to properly assess which mergers serve the public interest and which do not.”
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