Sen. Elizabeth Warren, D-Mass., rebuked Janet Yellen in a letter Tuesday, telling the top Treasury official that bank mergers should not be encouraged in the wake of multiple bank failures.
Warren raised objections to public comments Yellen and Acting Comptroller of the Currency Michael Hsu made in recent weeks suggesting they would be open to more mergers and consolidation in the banking industry.
"While your agencies are working to update the guidelines under which you evaluate bank mergers, which were last published in 1995, the recent bank crisis underscores the urgency of strengthening the merger review process and reversing the dangerous trend of bank consolidation," Warren wrote.
According to The Hill, Hsu testified before Congress last month that his office was "committed to being open-minded when considering merger proposals and to acting in a timely manner on applications."
Reuters reported that Yellen made similar remarks at a Group of Seven financial meetings in Japan last month.
"This might be an environment in which we're going to see more mergers, and you know, that's something I think the regulators will be open to, if it occurs," Yellen reportedly said at the time.
Bank regulators and Treasury officials seem to be learning "the wrong lessons" from the recent failures of Silicon Valley Bank, Signature Bank, and First Republic, according to Warren.
"Allowing additional bank consolidation would be a dereliction of your responsibilities, hurting American consumers and small businesses, betraying President [Joe] Biden's commitment to promoting competition in the economy, and threatening the stability of the financial system and the economy," the Massachusetts Democrat said in her letter. "Shoring up our banking system will require stronger regulation and more vigorous oversight of big banks to keep them from failing in the first place, and stronger merger guidelines and rules that significantly check consolidation and limit the size and number of too big to fail banks that put taxpayers at risk."
Warren's criticism is likely just the opening salvo of a push by her to curb mergers involving large banks and revealed a significant schism among senior Biden administration officials over economic policy.
While a broader crackdown on corporate mergers is sought by Biden, some administration officials believe that more bank mergers could help stabilize the U.S. banking system.
JPMorgan Chase's acquisition of First Republic last month, for example, was signed off on by U.S. officials.
According to Politico, bank lobbyists, who want the administration to enable mergers, have noticed "something of a sea change." Instead of Yellen, bank regulators and the Department of Justice have the authority to reject potential bank mergers.
In addition to Yellen and Hsu, Warren sent her letter to FDIC Chair Martin Gruenberg and Fed Vice Chair for Supervision Michael Barr and requested an update from their agencies on merger review guidelines outlined by Biden in a 2021 executive order.
The senator also pressed Assistant Attorney General Jonathan Kanter on why banks are no longer being forced by the Justice Department to divest branches as a condition of merging with other banks.
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