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Democrats Urge Biden Administration to Reject Capital One and Discover Merger

 |  February 26, 2024

Thirteen leading Democrats in Congress, spearheaded by Senator Elizabeth Warren, have issued a fervent plea to the Biden administration to block the proposed merger between Capital One and Discover Financial Services. In a joint effort, they caution that the consolidation could severely limit consumer choices in banking and credit card services while potentially burdening them with exorbitant fees.

The proposed merger, valued at a staggering $35.3 billion, aims to create the largest credit card lender in the United States by amalgamating the assets of Capital One and Discover. If greenlit, this fusion would unite Capital One’s extensive banking and card businesses with similar offerings from Discover, including its robust payment network, which competes directly with industry giants like Visa and Mastercard, reported Wall Street Journal.

The bipartisan coalition, comprising prominent figures such as Representatives Alexandria Ocasio-Cortez, Ayanna Pressley, and Katie Porter, expressed deep reservations about the merger’s implications for consumer welfare. They highlighted concerns over the prevailing dominance of a handful of major bank holding companies in the financial landscape, emphasizing the urgent need for regulatory measures to counteract further consolidation.

In a letter shared exclusively with The Washington Post, the lawmakers underscored President Biden’s commitment to combatting market concentration across various sectors, including banking. They emphasized the impending merger review as a critical litmus test for the administration’s resolve to uphold antitrust principles and safeguard competition in the financial industry.

The Democrats’ missive represents a broader pushback against what they perceive as a “permissive approach” to bank mergers, advocating instead for stringent rules to curtail rampant consolidation. They argue that allowing the Capital One-Discover merger to proceed unchecked would exacerbate the existing oligopolistic tendencies within the banking sector, ultimately to the detriment of consumers.

With top executives at Capital One and Discover anticipating the deal’s closure in late 2024 or early 2025, pending regulatory approval, the ball now rests in the court of U.S. regulators, including the Treasury Department and the Federal Reserve. These agencies face the formidable task of evaluating whether the proposed merger aligns with the broader objectives of promoting competition and protecting consumer interests, particularly in light of President Biden’s intensified focus on antitrust enforcement.

As the review process looms on the horizon, all eyes are on the Biden administration to see whether it will heed the Democrats’ impassioned appeal and stand firm against what they view as a potential threat to the fabric of competition in the financial marketplace.

Source: Washington Post