#FTC – Federal Financial Analytics

17 04, 2025

FedFin on: Antitrust Policy

Arezou Rafikian-12025-04-17T16:29:07-04:00April 17th, 2025|The Vault|

As required by an executive order (EO) from President Trump mandating both review and then repeal of any rules that adversely affect competition, the FTC is seeking public comment on which rules to target and whether these standards could be modified or must be rescinded to meet the President’s goals. This process will clearly invite new scrutiny of the bank-merger process, also likely to lead to comment from banking organizations seeking relief in areas such as de novo chartering requirements and access to brokered or reciprocal deposits….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.

…

18 02, 2025

Karen Petrou: The Fed’s Sudden GSIB Jihad

Shane Smith2025-02-18T09:06:45-05:00February 18th, 2025|The Vault|

Even as he stoutly assured Congress last week that the Fed is staunchly apolitical, Chair Powell acknowledged several post-inauguration epiphanies. These include sudden recognition of the supplementary leverage ratio’s impact on Treasury-market liquidity and the importance of cost-benefit and cumulative regulatory-impact analyses along with disavowal of all things climate risk. Another Fed U-turn relates to merger policy, but this escaped broad notice. It shouldn’t have – bank-merger policy is due for a major makeover and that matters.

In a detailed FedFin analysis of banking-industry competition last year, we looked at current market realities and years of research showing that the dramatic erosion in U.S. bank charters is not due to voracious big-bank gobbling of small-bank charters. Instead, it’s the result of inexorable technological advances combined with an array of new rules that challenge the ability of all but the very biggest banks to achieve the economies of scale and scope now vital to charter survival. Many new rules, warranted or not, have also had the inexorable effect of enabling regulatory arbitrage, empowering massive nonbank competitors who easily quash vulnerable companies unable to match technological prowess and network effects.

Sudden Fed policy reversals did not escape Republican notice, with Senate Banking Chair Scott commenting acidly about Fed “flip-flops.” But, unless Members of Congress make Jay Powell angry – and that’s hard to do in public – nothing the Fed chair says in public is offhand even if it seems that way at the time. During last week’s hearings, Mr. Powell changed …

25 09, 2024

FedFin on: DOJ Bank-Merger Policy

Eliza Allen2024-09-25T15:37:45-04:00September 25th, 2024|The Vault|

In conjunction with final merger-policy statements from the FDIC and OCC, the Department of Justice (DOJ) released “commentary” expanding on how the 2023 guidelines it issued along with the Federal Trade Commission expressly apply to bank mergers. The DOJ’s commentary and that from the other banking agencies revise merger policy last set in 1995. However, the Fed has yet to do so or even clarify how all of these actions affect its approach beyond a statement earlier this year that the FRB was working with other agencies and a more recent answer from Vice Chair Barr that he is content with Fed policy as it stands…

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

9 09, 2024

Karen Petrou: Workers’ Rights and Merger Wrongs

Eliza Allen2024-09-09T13:28:07-04:00September 9th, 2024|The Vault|

In all the fuss and fury over banking-agency merger policy, many have missed a consequential late-August announcement from other U.S. antitrust authorities laying out how workers’ rights will drive merger approvals. This follows 2023 guidelines from the Department of Justice and Federal Trade Commission retracting the old price criterion by which consumer welfare has long been judged in favor of policies taken factors such as network effects and “soft” market power fully into account. The guidelines addressed workers’ rights, but the new agreement adds sharp, sharp teeth. Thus, it’s clear that Administration policy is focused on economic justice along with its tough stand on monopolization. Bankers take warning: operational-integration rationales now cut two ways when it comes to merger approval.

To be sure, bankers are used to one economic-justice criterion when it comes to merger approval: those requiring consideration of customer “convenience and needs” based in large part on how this is demanded of them under the Community Reinvestment Act. Banks planning an acquisition thus typically accompany an offer with a massive CRA pledge promising more loans to low-and-moderate individuals and communities, affordable-housing investments, and the like.

This won’t cut it under the pending merger-policy rewrites from the OCC and FDIC, but these proposals generally do not replace CRA-style approval criteria. Instead, they beef them up, with the FDIC’s policy most notably (and dubiously) requiring acquirers to prove that communities not only will be better served, but also better served than if each bank remained independent.

However, the FDIC also …

25 07, 2023

FedFin Analysis: U.S. Merger Policy

Arezou Rafikian2023-07-25T17:18:51-04:00July 25th, 2023|The Vault|

Building on a request for comment, the Department of Justice (DOJ) and Federal Trade Commission (FTC) have now proposed specific revisions to U.S. merger policy that significantly redirect the manner in which M&A transactions – even if only for minority positions – will be considered. Although this is only a draft statement, it tracks much of what President Biden laid out in his 2021 executive order on U.S. competition policy and actions since then by the DOJ and the FTC. As a result, the guidelines are more of a roadmap providing clarity than a new approach unless the final version differs substantively in any major way or future Administrations adopt a different policy. Near-term U.S. merger policy makes it considerably more difficult to finalize horizontal, vertical, and even minority holdings, a challenge likely to be particularly acute in U.S. financial services where government agencies believe there is …

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

10 07, 2023

Karen Petrou: The Bankruptcy of Bank-Merger Policy

Eliza Allen2023-07-10T14:18:07-04:00July 10th, 2023|The Vault|

On Wednesday, a Senate Banking subcommittee will consider bank-merger policy, surely providing a platform for its chair, Sen. Warren’s pronounced views opposing all but the smallest bank mergers and maybe not even those. Many other senators are not as adamant, but even pro-business Republicans – see J.D. Vance – think bank mergers beyond the itty-bitty are at best problematic. The politics of this debate is obvious; the substance not so much. As with many other questions, bank-merger policy is best set with a keen understanding of recent, objective research and what it actually says about concentration as it occurs outside the gaze of those fearful only of still bigger big banks.

That there is undue market power in a financialized economy that brings a raft of woes is all too clear. I thus hoped that Assistant Attorney General Kanter’s remarks last month would be a meaningful update of the Department of Justice’s anachronistic 1995 policy. It helped, but only a bit because Mr. Kanter focused principally on enforcement, leaving “broader” questions solely to the banking agencies.

They in turn have long promised a transparent merger policy, but it’s still deal-by-deal, case-by-case, crisis-by-crisis. More than a few mid-sized banks will wither away as deliberations continue because the sheer uncertainty and delays of most bank mergers undermine their economic value, particularly at a time of high interest rates, slow or no growth, tough new rules, and withering competition.

Recent antitrust research does not substantiate easy, blanket assertions about the benefits or …

6 04, 2023

FedFin: Extra Equitable?

Arezou Rafikian2023-04-06T16:36:29-04:00April 6th, 2023|The Vault|

FHFA, Fannie, and Freddie yesterday updated the sometimes-controversial equitable-finance plans FHFA approved last year. Notably, Fannie’s new plan no longer focuses exclusively on Black households, a feature that garnered vitriolic Wall Street Journal criticism and negative Republican reactions. Freddie’s plan delays and may even back away from efforts to set MI and title insurance pricing.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

21 12, 2022

FedFin on: Nonbank Enforcement-Order Registry

Arezou Rafikian2022-12-21T16:54:37-05:00December 21st, 2022|The Vault|

The CFPB is proposing to create a public registry of certain enforcement actions that would initially cover nonbanks (including BHCs) with a goal of drawing public and enforcement-agency attention to what the Bureau’s director calls “serial offenders.” …

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

17 08, 2022

FedFin on: Data-Safeguard Legal/Reputational Risk

Arezou Rafikian2023-01-04T11:55:58-05:00August 17th, 2022|The Vault|

Using another of its tools to set policy without prior public comment, the CFPB has released a circular stating that inadequate consumer-data safeguards may constitute a breach of the unfair, deceptive, or abusive acts or practices (UDAAP) protection standards subject to Bureau enforcement action. This is the case even if no consumers have been harmed, if only one consumer is adversely affected, …

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

6 12, 2021

Karen Petrou: Why Pro-Competition Consumer Finance May Not be Pro-Consumer Consumer Finance

Arezou Rafikian2023-05-23T13:26:47-04:00December 6th, 2021|The Vault|

Under Rohit Chopra, consumer protection has taken an important, widely-overlooked turn with potent consequences for all retail financial-product providers. Media coverage of the CFPB’s bigtech order, mortgage-discrimination action, and last week’s anti-overdraft campaign highlighted traditional issues such as fair lending and predatory pricing. These are indeed in the CFPB’s sights, but so also is a much bigger target: the extent to which a few large companies are said to be able to set consumer interest rates and otherwise dictate the shape of U.S. retail finance. This might cut big banks down to the puny size their critics seek, but it’s more likely to accelerate the transformation of retail finance into a wild west of unregulated providers outside the reach of safety-and-soundness standards and, in many cases, even of the CFPB. If this pro-competition campaign is mis-calibrated, the CFPB will put consumers at still greater risk.

Mr. Chopra’s interest in market competition doubtless derives from his stint as a lone, strong voice at the Federal Trade Commission who lost pretty much every battle he waged against giant corporate combos. It surely stems also from President Biden’s executive order demanding that federal agencies take express pro-competitive action. And, indeed, there’s a lot to do in sectors such as tech-platform companies that already seem to have skipped over just being monopolies to become potent oligopolies with powerful impact over each aspect of everyday life, not to mention pricing and economic inequality.

However, neither traditional nor neo-Brandeisian antitrust theory applies well …