Senate Democrats Alarmed by Bank Mergers

America’s biggest banks are only getting bigger thanks to a spate of mergers that paved the way for some of the biggest and most lucrative tie-ups in over a decade. The rash of multi-billion dollar deals is setting off alarm bells in Washington, where some lawmakers are becoming increasingly critical of the country’s financial giants.     

Democratic Senators Elizabeth Warren and Sherrod Brown are concerned that the dealmaking among the big banks will hurt average consumers and make it impossible for the smaller banks to stay competitive. 

Data from S&P Global Market Intelligence shows that 52 banks had over $50 billion in assets by the end of the first quarter of 2021. This is a significant rise from the end of 2017 when there were 39 banks with the same net worth. 

Since the start of 2021, PNC (PNC) acquired BBVA USA Bancshares, while TCF joined forces with Huntington Bancshares. Several other banks have also announced new deals that are still awaiting approval. People's United (PBCT) was purchased by M&T Bank, New York Community Bancorp (NYCB) bought Flagstar Bancorp (FBC), and Webster Financial (WBS) merged with Sterling Bancorp (SBT). 

The recent spike in bank mergers is being attributed to changes in regulations dating back to 2018. That’s when the Senate ruled that banks must have $250 billion in assets instead of $50 billion in order to be considered systemically important financial institutions (SIFIs). At this point, there are only a dozen banks that are capable of getting the SIFI designation, including Wells Fargo, Citigroup, JPMorgan Chase, and Bank of America. Of course, these are also the same institutions that offer some of the most attractive financial tools, including high-yield savings accounts. 

For its part, the White House is already targeting the bank mergers. US President Joe Biden issued an executive order earlier this month that asks the Federal Reserve and the Department of Justice to update the guidelines for the mergers and scrutinize the deals. 

Meanwhile, Senator Brown, who chairs the Senate's Banking, Housing, and Urban Affairs Committee, grilled Federal Reserve Chairman Jerome Powell during the latter’s testimony about the economy.

“We need a banking system that works for everyone,” Brown said. “We can’t let big banks merge into bigger and bigger megabanks, making it harder for small banks to compete.”