Federal officials faced pressure from Warren and Waters to reconsider their decision on Capital One's proposed acquisition of Discover Bank.
Federal Reserve's Decision on Capital One-Discover Merger Sparks Controversy
The Federal Reserve's approval of Capital One's proposed $35.3 billion acquisition of Discover has been met with opposition from lawmakers, notably Sen. Elizabeth Warren and Rep. Maxine Waters. The merger, which was completed in May 2025, has stirred debate over the potential effects on competition, financial stability, and consumer protection.
The lawmakers have requested that the Federal Reserve reconsider its decision, citing insufficient analysis of the transaction's impact on low-income consumers, competition, and financial stability in the U.S. They argue that the Fed's assessment failed to include relevant information from the Justice Department, Federal Deposit Insurance Corp., and Consumer Financial Protection Bureau.
Sen. Warren and Rep. Waters contend that the Fed underestimates the effect a Capital One-Discover combination would have on financial stability in the U.S., with the resulting bank, with a $637 billion asset size, being larger than Silicon Valley Bank, Signature, and First Republic combined. They also question the Fed's claims that it conducted a high-level analysis of the transaction's impact on credit card consumers, stating that it did not evaluate whether fees, credit availability, interest rates, or non-price harms like customer service would be impacted by the deal.
The lawmakers have suggested that the Fed should consider purchasing licensing rights to avoid potential issues with the resolution of Capital One and Discover. They also expressed concern about recent efforts to drastically downsize the Consumer Financial Protection Bureau.
In a letter to the Federal Reserve, Warren and Waters argued that the Fed's analysis of community benefits "neglected to evaluate how the combined institution would serve communities on a going forward basis." They also cited a Fed board rule that allows the seven-governor panel to reconsider an application if it receives a written request within 15 days of a deal's approval, and assert that they qualify as parties because they submitted comments on the application.
The lawmakers have also pointed out that the Fed's competitive effects analysis was based on deposit market concentration and did not take credit cards into account. They asked that the Fed reevaluate the competitive effects of the deal using data from the first quarter of 2025 and incorporate large-bank credit card and mortgage data recently published by the Philadelphia Fed.
The Fed's approval order acknowledges consulting with the FDIC and CFPB, but it is unclear if the information and analyses in these formal communications were part of the factual record presented to the Governors. The lawmakers have also highlighted that the Department of Justice withdrew guidelines leaning heavily on the Herfindahl-Hirschman Index last year, but even using them, a transaction that boosts HHI by 200 points or scores above 1,800 is generally flagged as anticompetitive.
In a development after the Fed considered the Capital One-Discover deal, the Department of Government Efficiency made an incursion at the FDIC. The lawmakers have not provided specific details on their arguments against the approval of this merger, but antitrust and consumer protection concerns are typical grounds for their opposition in similar cases.
The Capital One-Discover deal, under the Fed's current analytical approach, would have a systemic risk score double that of Silicon Valley Bank. However, it is important to note that the merger has been completed, and the Federal Reserve's reconsideration period has ended.
This article is based on available sources and does not contain recent statements or policy positions from Sen. Warren or Rep. Waters that may be found in congressional records or press releases.
1) Sen. Warren and Rep. Waters are advocating for the Federal Reserve to reconsider its approval of the Capital One-Discover merger, stating that it underestimates the impact on financial stability and overlooked relevant information from various financial regulatory bodies.
2) The lawmakers have expressed concerns about the Federal Reserve's analysis of the Capital One-Discover deal, arguing that it was insufficient, particularly in evaluating the potential effects on competition, low-income consumers, and credit card consumers. They have also suggested that the Fed should reassess its competitive effects using more current and comprehensive data.
