Sen. Elizabeth Warren, D-Mass., and Rep. Jesús "Chuy" García, D-Ill., reintroduced a bill Thursday that would ramp up scrutiny of proposed mergers between the country’s biggest banks, the latest in a series of moves by federal lawmakers to crack down on business practices they consider harmful to competition.
Warren and Garcia argue the existing review process for bank mergers is "fundamentally broken," with regulators serving as "rubber stamps" for the institutions. Their legislation, dubbed the "Bank Merger Review Modernization Act," would require the Consumer Financial Protection Bureau to sign off on any merger in which at least one institution offers consumer financial products.
"Community banks are being gobbled up by larger competitors or forced to shut down because they can’t compete on a level playing field," Warren said in a statement. "This results in more concentration, higher costs for consumers, and increased systemic risk to our financial system.
"The bill Congressman García and I are reintroducing would ensure that regulators do their jobs by stopping mergers that deprive communities of the banking services they need and help prevent another financial crisis," she added.
The legislation would require regulators to use a "quantifiable metric" to assess the systemic risk a proposed merger would pose if the combined entity failed. It would also require merged banks to have "adequate financial and managerial resources" and for regulators to assess whether a merger would have harmful effects on the market for key consumer services such as home mortgage lending.
The two Democratic lawmakers originally introduced the legislation in 2019, though it failed to gain traction in the Republican-controlled Senate.
"Bank consolidation means more pay and profits for big banks and fewer bank branches in neighborhoods like mine. It’s time for our government to stop rubber stamping bank mergers," Garcia said in a statement. "This bill ensures our regulators consider the impacts of a merger on consumers, workers, and our financial system."
In July, President Biden issued an executive order calling on federal lawmakers to take actions that would promote market competition.