Sen. Warren Urges More Rigorous Bank Merger Reviews as the Justice Department Looks to Update Its Guidelines

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The following is a media release from Sen. Elizabeth Warren’s office. She was elected by voters in the Commonwealth of Massachusetts to serve the state in Washington DC in the US Senate. She is a Democrat.

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Text of Letter (PDF)

WASHINGTON DC – United States Senator Elizabeth Warren (D-Mass.) sent a letter Friday, October 16 to Assistant Attorney General Makan Delrahim, head of the U.S. Department of Justice (DOJ) Antitrust Division, to raise concerns that in updating its 1995 Bank Merger Competitive Review guidelines for the first time in 25 years, DOJ “seeks to weaken the already insufficient process currently in place to review bank mergers, making it even easier for these mergers to occur.” 

“Weakening these rules will reduce competition and exacerbate the effects of banking industry consolidation on all consumers – and particularly the most vulnerable low-and-moderate-income (LMI) communities. Instead, the Division should use this opportunity to strengthen the guidelines to protect consumers and the economy,” Senator Warren wrote. 

Before banks merge, they need approval from both the DOJ and the surviving institution’s primary financial regulator. , but the review process for bank mergers is fundamentally broken and has enabled a wave of bank mergers over the past three decades.

The Bank Lobbyist Act (S. 2155) passed in 2018 further catalyzed mergers among large banks, as Senator Warren warned it would. 

Studies show that bank mergers can result in higher costs to consumers and decreased access to financial products, especially in rural areas. And when two large banks merge, it has even greater risks, potentially creating a bank that’s too big to manage effectively or creating a new Too Big to Fail bank that could threaten financial stability. 

During a 2019 Banking Committee hearing, Federal Reserve Chairman Jerome Powell confirmed to Senator Warren that virtually all bank mergers are approved, as banks will often back out of the merger if the regulator raises concerns during the behind-the-scenes, pre-screening process.

As a result, the merger review practice lacks analytical rigor and transparency, and regulators serve as rubber stamps. Of the 3,819 bank merger applications the Fed received between 2006 and 2017, it did not decline a single one. 

To bring much needed rigor to the bank merger review process, Senator Warren introduced the Bank Merger Review Modernization Act with Representative Chuy García to strengthen various aspects of the review process, including the anticompetitive analysis and transparency requirements, among the regulators, similar to the recommendations she makes in her letter to DOJ.

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