No, a 'shot clock' won't improve the bank merger approval process

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When basketball players face a shot clock, they often rush and miss. Yet that is exactly what Rep. Andy Barr wants to impose on our banking system — a rigid 90-day "shot clock" for merger approvals, which the House Financial Services Committee will vote on tomorrow. As Republicans reshape financial policy, this rushed approach to bank consolidation threatens to undermine careful regulatory oversight.

Barr's plan is simple: Force the Federal Reserve to approve or deny mergers within 90 days. No decision by the deadline? The merger automatically gets approved.

Barr's intent makes sense on the surface. When a merger clearly satisfies statutory factors — including competition, convenience and needs of the community, and financial stability — regulators should not drag their feet. By the same token, when an application fails these tests, regulators should reject it promptly rather than let banks endlessly supplement their paperwork through additional information requests.

Although the spirit behind Barr's proposal is laudable, putting a hard deadline on merger decisions is both unnecessary and harmful.

First, regulators already handle bank merger applications efficiently. Over the past four years, the Fed's median processing time has been just 45 to 49 days. To be sure, some unusually complex deals, such as the recent Capital One-Discover merger, can take a year or more to evaluate. But when a community bank submits a merger application, odds are that regulators will approve it in less than two months.

Even if processing delays are truly a concern, policymakers can address the issue through less draconian interventions. Just last year the FDIC board unanimously approved, on a bipartisan basis, a proposal by then-Vice Chairman Travis Hill requiring staff to brief the board on any merger application outstanding for more than nine months, and every quarter thereafter. This sensible reform enhances the board's oversight of the most complex merger applications without requiring the FDIC to reach a final decision within a defined time period.

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A rigid 90-day "shot clock" would force rushed, uninformed decisions. Basketball fans know that shots taken as the shot clock expires are significantly less accurate than unrushed attempts.

The same principle holds true for government decision-makers.

Research backs this up. A recent study showed that federal judges made more errors after Congress passed a law requiring them to disclose cases pending for over three years. The judges' decisions sped up but were more likely to be overturned on appeal. Bank merger decisions would suffer the same fate under a shot clock.

Rep. Barr's proposal is especially problematic in today's legal environment where courts increasingly scrutinize regulatory agencies. If federal bank regulators ever wanted to deny a merger, they would need substantial time to build an evidence-based case that could withstand judicial challenge. A 90-day shot clock would make it almost impossible for the Federal Reserve to build a supportable case against any merger. One suspects that this might be an ulterior motive behind Rep. Barr's proposal.

If Republicans truly want faster merger decisions, they should oppose the Trump administration's planned cuts to the federal banking agencies. Eliminating thousands of positions at the Fed, FDIC and OCC will cripple already understaffed agencies and severely hamper their ability to evaluate mergers properly.

Bank mergers reshape our financial landscape and affect millions of Americans. Getting these decisions right requires careful analysis, not rushed judgments forced by artificial deadlines. If Congress truly wants a banking system that serves communities while remaining stable and competitive, it should strengthen regulatory capacity rather than hobbling it with unnecessary constraints. Rushing these decisions through an arbitrary shot clock is not just bad policy — it could be a recipe for the next financial crisis.