The proposed $35.3 billion megamerger between Capital One and Discover would turn the combined company into the largest credit card lender in the United States, according to Bloomberg Intelligence data. The deal will combine Capital One’s banking and cards businesses with similar assets from Discover, including a payment network that competes with Visa, Mastercard and others.
Top executives at Capital One and Discover said: The transaction is expected to close in late 2024 or early 2025 and is subject to approval from U.S. regulators, including the Treasury Department and the Federal Reserve. As President Biden seeks to strengthen antitrust enforcement, federal authorities must consider whether they benefit competition and consumers when scrutinizing agreements.
That process is expected to begin soon, with Warren and other Democratic leaders including Reps. Alexandria Ocasio-Cortez (New York), Ayanna Pressley (Massachusetts) and Katie Porter (California) said the merger was “bad for consumers” and pointed out that: Due to the fact that the industry is already dominated by six large bank holding companies.
“President Biden has made combatting concentration in the banking sector and other industries a key priority of his administration,” the Democrats wrote in the letter, which was earlier shared with The Washington Post. It is. They said the upcoming merger review is “one of the most important tests in efforts to prevent harmful bank consolidation” facing the Biden administration.
“To protect consumers and financial stability, we urge you to block this merger and strengthen the proposed policy statement to prevent future harmful transactions,” they said.
The early opposition underscores the tough political challenges facing Capital One and Discover, which have begun pitching the deal to federal regulators. Congress does not have the final say on the deal, but lawmakers have the power to pressure and investigate companies, including demanding testimony on Capitol Hill.
Since announcing the merger last week, Capital One and Discover defend the deal as beneficial to customers and shareholders alike, and have expressed confidence in their ability to win government approval. Capital One CEO Richard Fairbank told investors on a conference call last week that the partnership “will allow us to more effectively compete with some of the largest U.S. banks and payment companies.” I will be able to do it,” he said.
But under the Biden administration, federal merger reviews have become especially tough as the administration seeks to crack down on consolidation in a wide range of industries. In recent years, governments have challenged or blocked large deals involving major airlines, biotech companies and technology giants, and regulators are currently blocking the merger of two grocery chains, Albertsons and Kroger. It appears that they are moving towards a lawsuit.
Biden, meanwhile, has been particularly vocal in criticizing large companies that have expanded in size, arguing that the loss of consumer choice is driving up prices across the economy. In 2021 he signed a contract. Far-reaching Executive Order Regarding antitrust laws aimed explicitly at the financial sector: The directive requires federal regulators to “update guidelines on bank mergers and provide greater oversight of mergers” and “ensure that Americans have a choice between financial institutions.” ”.
But since then, the U.S. government has approved “nearly every merger application” it has received in the past three years, but has not fully updated those rules, according to Democratic lawmakers, citing Treasury Department data. He says he hasn’t. Warren and others said the lenient response from the Office of the Comptroller of the Currency (OCC), which oversees such transactions, stands in stark contrast to the regulator’s own warnings against further consolidation.
“It is important that the OCC strengthen its proposed policy statement to ensure that future mergers do not negatively impact consumers and the broader economy,” the Democrats said.
