Federal officials are being urged to reconsider a potential merger between Capital One and Discover, with Senate Banking Committee Chair Elizabeth Warren and Representative Maxine Waters leading the charge.
Federal Reserve Approves Capital One-Discover Acquisition Amidst Regulatory and Political Scrutiny
The Federal Reserve has approved Capital One's proposed $35.3 billion acquisition of Discover, a move that has faced significant regulatory and political scrutiny. Senators Elizabeth Warren and Representative Maxine Waters have raised concerns about the Fed's analysis of the deal, focusing on competition effects, financial stability, and the impact on low-income consumers.
The senators worry that the merger could reduce competition in the credit card and banking markets, potentially harming consumers. They question if the Federal Reserve sufficiently evaluated systemic risks posed by the enlarged entity and whether it adequately assessed how the merger would affect lending and services to low- and moderate-income communities.
Despite Capital One's commitment to an expansive community benefits plan, critics like Warren and Waters argue that the Fed's review did not fully address whether these commitments adequately offset potential competitive harms and financial risks. The senators have urged the Federal Reserve to reconsider its approval of the deal.
One of the key issues raised by Warren and Waters is the Fed's analytical approach. They argue that the Capital One-Discover deal, under the Fed's current approach, would be "well below" the global systemically important threshold but "would have a systemic risk score double SVB's." This raises concerns about the Fed's reliance on 'global' metrics of systemic risk rather than focusing on the U.S. specifically.
The Fed's competitive effects analysis did not take credit cards into account, another point of contention. The senators also criticize the Fed for ignoring facts outlined in the CFPB's 2025 lawsuit against Capital One for allegedly cheating millions of consumers out of more than $2 billion in interest.
The Fed's board currently consists of four Democrats and three Republicans. Despite the majority of public comments (91%) opposing the deal, the Fed concluded that the Capital One-Discover combination would not result in meaningfully greater or more concentrated risks to the stability of the U.S. financial system. However, this conclusion has been questioned by Warren and Waters.
Under Fed rules, the board may reconsider an application if it receives a written request within 15 days of a deal's approval from any party to such application. Warren and Waters argue that they qualify as parties to the application because they submitted comments on it. The lawmakers have also requested that the communications from the FDIC and CFPB to the Fed, as well as the DOJ's communication to the Fed during the Biden administration, be made public.
As of mid-2025, the Federal Reserve's approval of the Capital One-Discover acquisition allows the deal to close in May 2025. However, the regulatory and political scrutiny surrounding the deal is likely to continue.
[1] Source: News Article 1 [2] Source: News Article 2 [3] Source: Lawmakers' Letter to the Federal Reserve [4] Source: Office of the Delaware State Bank Commissioner Approval Notice [5] Source: Federal Reserve Press Release
The approval of Capital One's acquisition of Discover by the Federal Reserve faced intense scrutiny from Senators Elizabeth Warren and Representative Maxine Waters, who questioned the Fed's analysis on competition effects, financial stability, and impact on low-income consumers, as well as its reliance on 'global' metrics of systemic risk and neglect of credit card market considerations. In their letter to the Federal Reserve, Warren and Waters argued that they, as parties to the application, were entitled to have the communications from the FDIC, CFPB, and DOJ during the Biden administration made public.
