WASHINGTON, D.C. – U.S. Sen. Sherrod Brown (D-OH), Chairman of the
U.S. Senate Committee on Banking, Housing, and Urban Affairs, sent a letter to
Federal Reserve Chair Pro Tempore Jay Powell and Acting Comptroller of the
Currency Michael Hsu urging them to join the Federal Deposit Insurance
Corporation (FDIC) in ensuring that bank mergers, if approved, serve American
families, small businesses, and communities – not Wall Street and big
corporations.
“Enabled
by rubber-stamp merger oversight, the biggest banks have only grown bigger and
consolidated their dominance—the last few years have made this trend obvious.
This consolidation has enriched big bank shareholders and executives, buoyed by
record bank profits. But their gains have come at the expense of consumers and
small businesses with less access to low-cost financial services. The data is
clear about the serious, wide-ranging harms that bank mergers impose on
communities,”
warned Sen. Brown.
He
wrote, “I urge you to initiate a public comment process on bank merger
review, like the FDIC’s, and to work with DOJ to ensure that we have a fair and
competitive financial system. In light for the growing concern of how
concentration hinders free markets, a public comment process would allow
Americans to share how mergers have affected their communities and allow the
agencies to reconsider their approval frameworks to better focus on small
businesses, consumers and families, as Congress intended.”
A copy of the letter is available
here and
below.
Dear
Chair Pro Tempore Powell and Acting Comptroller Hsu:
To
protect consumers, small businesses and their communities, I urge the Fed and
OCC to join the FDIC and review and reconsider their approach to big bank
mergers. The federal banking agencies must all adopt a posture toward bank
merger reviews that prioritizes competition, financial stability, and the needs
of working families and small businesses.
Our
markets have grown increasingly concentrated. In three-out-of-four industries,
consolidation has grown since the 1990s, driving up prices for consumers and
undercutting worker bargaining power. Concentration has undercut family farms
which due to declining competition face a no-win scenario where they pay ever
rising prices for inputs, like seed and fertilizers, but must accept
take-it-or-leave-it prices when their livestock goes to market.
To
confront concentration, agencies across the federal government have pushed to
tighten competition policy. The Justice Department and Federal Trade Commission
have opened their merger guidelines for revision. The Department of Agriculture
has pushed to fight consolidation and unfair trade practices in poultry, hog,
and cattle markets. And President Biden has spearheaded a whole-of-government
initiative to promote competition through his executive order on competition
last July.
The
banking system has witnessed the same steep and worrying drop in competition as
has other industries. Enabled by rubber-stamp merger oversight, the biggest
banks have only grown bigger and consolidated their dominance—the last few
years have made this trend obvious. This consolidation has enriched big bank
shareholders and executives, buoyed by record bank profits. But their gains
have come at the expense of consumers and small businesses with less access to
low-cost financial services. The data is clear about the serious, wide-ranging
harms that bank mergers impose on communities.
At
its core, consolidation hurts consumers. In the aftermath of a merger, the
rates banks pay depositors go down, while the rates and fees banks charge
borrowers go up. Bank branches invariably close, making it harder for consumers
to access financial services in their neighborhoods. Troublingly, branch
closures are usually clustered in low- and moderate-income communities. That’s
why these closures often push consumers out of the banking system and, toward
high-fee, predatory non-bank financial companies—like check cashers and payday
lenders—that appear where branches used to be. In fact, households in
communities affected by bank mergers are more likely to see debts sent to
collections agencies, or to become evicted.
Consolidation
also harms small businesses. Study after study has documented how, following
bank mergers, small business lending dries up and available loans become more
expensive. It’s little wonder that small business formation subsequently
suffers. Consolidation among banks also supports consolidation in non-financial
industries, undermining small enterprises. Meanwhile, community banks that
serve rural and smaller communities and support more small business lending
than Wall Street banks are forced to compete on an uneven playing field with
nonbank fintech companies.
Finally,
mega mergers jeopardize financial stability by creating new “too big to fail”
institutions. A wealth of data and evidence supports the commonsense point that
larger banks pose greater systemic risks. The Federal Reserve found that the
failure of a single large bank has a greater negative impact on the economy
than the failures of multiple banks that are together the size of the large
bank.
We
need a more energetic, more vigilant framework for bank merger review—one that
reflects today’s banking landscape and understands how market concentration
undermines competition. This framework would enable regulators to carefully
scrutinize a merger’s impact on our economy and the communities served. Under
the Bank Merger Act, Congress requires regulators to consider whether a
transaction could leave consumers and small businesses outside the banking
system—without a convenient bank branch or accessible financial services. But
too often, the banking agencies have brushed this requirement aside, allowing
for an unchecked run of megabank deals. Regulators last denied a bank merger
application in 2003. It is time for regulators to transform their approach to
better protect the consumers and small businesses that bank mergers leave
behind.
I
applaud the efforts of the FDIC Board to seek comment on the effectiveness of
its bank merger framework. I am also encouraged by the Justice Department’s
recent request for public comment on how it might revise its Bank Merger
Competitive Review Guidelines.
The
Fed and OCC must follow their lead. I urge you to initiate a public comment
process on bank merger review, like the FDIC’s, and to work with DOJ to ensure
that we have a fair and competitive financial system. In light for the growing
concern of how concentration hinders free markets, a public comment process
would allow Americans to share how mergers have affected their communities and
allow the agencies to reconsider their approval frameworks to better focus on
small businesses, consumers and families, as Congress intended.
I
am hopeful that your agencies can join in on a new approach to bank merger
review that supports economic prosperity for all communities.
Sincerely,
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