Rep. Garcia and Sen. Warren Take on Bank Mergers in New Bill
Earlier this month, United States Senator Elizabeth Warren (D-Mass.) and Representative Jesús “Chuy” García (D-Ill.) introduced the Bank Merger Review Modernization Act, which they say would restrict harmful consolidation in the banking industry and protect consumers and the financial system from “Too Big to Fail” institutions, like those that caused the 2008 financial crisis.
The two representatives say the legislation is needed because from 2006 to 2017, the Federal Reserve approved all of the 3,819 bank merger applications it received.
“When big banks get bigger, consumers and taxpayers usually lose,” Congressman García said in a joint press release issued by the two members of Congress. “We must protect our financial system by slowing down bank consolidation. This bill will help address this, taking the Fed and FDIC off autopilot and giving consumers a voice in reviewing bank mergers.”
“The bill Congressman García and I are announcing today would ensure that regulators do their jobs by stopping mergers that deprive communities of the banking services they need, reward banks that cheat or discriminate against their customers, and risk another financial crisis,” said Senator Warren.
The merger review practice is supposed to evaluate the management process, the possibility of monopolies and risks, and any effects it may have on consumers. However, the two members of Congress say that financial agencies mostly analyze how the merger would impact competition, so regulation and review has fallen short.
The legislation would modernize consolidation by implementing these four standards: Guaranteeing that the Merger is in the Public Interest, Safeguarding the Stability of the Financial System, Requiring that Regulators Examine the Anticompetitive Effects on Individual Banking Products, and Ensuring that the Merged Bank has Adequate Financial and Managerial Resources.
Jeremy Kress, former Federal Reserve Board attorney, has endorsed the bill along with other U.S. financial institutions.
“This bill will restore rigor in the merger review process and ensure that banks may merge only when it is in the public interest,” Kress said in the press release.
The legislation has also been cosponsored by Reps. Jan Schakowsky (D-Ill.) and Rashida Tlaib (D-Mich.).