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Regulation and Compliance > Federal Regulation

Biden Executive Order Seeks to Rein In Bank Mergers

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What You Need to Know

  • Biden's order urges an update to guidelines on banking mergers to provide more scrutiny.
  • The curb of bank mergers is Democrats’ attempt to clean up their own mess caused by Dodd-Frank, says Rep. McHenry.
  • The SEC is urged to force the financial services industry to share data, Greg Valliere said.

President Joe Biden signed an executive order Friday afternoon to promote “open and fair” economic competition in the United States which, among other measures, curbs bank mergers and urges the Securities and Exchange Commission to force the financial services industry to share data.

The order — which includes 72 specific actions, Biden said Friday in televised remarks — “commits the federal government to full and aggressive enforcement of our antitrust laws,” Biden said. “No more tolerance for abusive actions by monopolies. No more bad mergers that lead to mass layoffs, higher prices, fewer options for workers and consumers alike.”

Added Biden: “I expect the federal agencies, and they know this, to help restore competition so that we have lower prices, higher wages, more money, more options and more convenience for the American people.”

Patrick McHenry, R-N.C., the top Republican on the House Financial Services Committee, said Friday in a statement that Biden’s “misguided” executive order would “drive up regulatory costs on financial institutions, leading to further consolidation.”

Biden’s curb of bank mergers is “nothing more than Democrats’ attempt to clean up their own mess caused by Dodd-Frank,” McHenry said.

“The law’s maze of mandates and regulations drove consolidation within the banking sector. When you find yourself in a hole, the first rule is to stop digging,” McHenry continued. “Democrats have instead decided to double down and want to impose even more regulation. This won’t help institutions — especially small and community banks — better serve their customers or create more competition in financial services.”

In the order, Biden encourages the Department of Justice 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.”

Also, the Consumer Financial Protection Bureau is encouraged to issue “rules allowing customers to download their banking data and take it with them.”

Greg Valliere, chief US strategist for AGF Investments, said Friday morning in his Capitol Notes email briefing that according to this morning’s Politico, “the new proposals will urge the FCC to implement net neutrality rules, along with urging the SEC to force the financial services industry to share data.”

Raymond James analysts added in a separate email briefing on Friday that Biden’s executive order was reportedly chiefly crafted by Tim Wu, special assistant to the president for technology and competition policy at the National Economic Council.

It “directs federal agencies to develop rules across a broad range of key industries aimed at lessening the market power of dominant firms in favor of worker bargaining power and increased competitive market dynamics. Big = bad,” the analysts wrote. “This is an attempt to shift the playing field towards workers and consumers.”

The executive order states that over the past four decades, “the United States has lost 70% of the banks it once had, with around 10,000 bank closures. Communities of color are disproportionately affected, with 25% of all rural closures in majority-minority census tracts. Many of these closures are the product of mergers and acquisitions. Though subject to federal review, federal agencies have not formally denied a bank merger application in more than 15 years.”

Excessive consolidation, the order continues, “raises costs for consumers, restricts credit for small businesses, and harms low-income communities. Branch closures can reduce the amount of small business lending by about 10% and leads to higher interest rates. Even where a customer has multiple options, it is hard to switch banks partly because customers cannot easily take their financial transaction history data to a new bank. That increases the cost of the new bank extending you credit.”


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