Warren takes aim at Biden administration, OCC's Hsu over bank mergers

Bloomberg News

WASHINGTON — Sen. Elizabeth Warren, D-Mass., leaned into her prior criticism of acting Comptroller of the Currency Michael Hsu and the Biden administration for their comments around bank mergers during a Senate Banking Committee hearing Wednesday. 

Warren zeroed in on Hsu's approval of JPMorgan Chase's acquisition of First Republic Bank after the California-based institution failed earlier this year. Warren's disapproval of Hsu's handling of bank merger policy is a long-standing issue between the two policymakers, and one that makes it significantly more difficult for the Biden administration to nominate Hsu to lead the OCC on a non-acting basis. 

"I am extraordinarily concerned about what we have seen in recent months from banking regulators," Warren said. "When First Republic Bank collapsed in April, the bank was ultimately sold to the biggest bank in America, JP Morgan Chase. That sweetheart deal cost the FDIC fund $13 billion. Meanwhile overnight the country's biggest bank got $200 billion bigger. And what happened to the regulator? The acting Comptroller of the currency Michael Hsu rubber-stamped the deal in record time." 

Before the bank merger hearing, chaired by Warren, the Senate Banking Committee held an executive session in which it voted to send the nominations of three Federal Reserve nominees to the full Senate for approval. Phillip Jefferson — who is nominated to serve as Vice Chairman of the Board of Governors — received unanimous approval from the panel, while Lisa Cook and Adriana Kugler, both of whom are nominated as a member of the Board of Governors, passed the committee with 13-10 votes.

Warren said that she would "soon" reintroduce her piece of legislation, the Bank Merger Review Modernization Act, which would require Consumer Financial Protection Bureau approval of bank mergers and set standards for banks' Community Reinvestment Act compliance in order to get merger approval, among other things. 

Unlike the first time Warren introduced that legislation, Warren could find some support for the idea of limiting large bank mergers from the Republican party. While the CFPB provisions might be an obstacle, the bigger picture idea of opposing megabanks purchasing smaller ones received support from Sen. J.D. Vance, R-Ohio, who introduced an amendment that would limit the ability of largest banks to purchase smaller failed ones as part of the executive compensation package sent through the Senate Banking Committee this month. 

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Warren also criticized Treasury Secretary Janet Yellen's recent comments that regulators would be open to more mergers in the wake of the bank failure turmoil from earlier this year. 

"The overall picture is even worse," Warren said. "Instead of inattentive regulators who don't use their tools to block increasing consolidation, leaders within the Biden administration seem to be inviting more mergers." 

Hsu earlier this week said at an event hosted by American Banker that "simply prohibiting all mergers of large banks really locks in the concentration among the existing megabanks, and I don't think that's the right answer." 

"These comments are stunningly wrongheaded," Warren said. "They indicate that key banking regulators have learned exactly the wrong lessons from the bank regulators this year and from the 2008 financial crash before it."