One day after a failed mega-merger attempt with Albertsons, Kroger launched plans to repurchase a massive $7.5 billion of their own stock, a clear effort to boost short-term stock prices and save CEO Rodney McMullen’s job by lining the pockets of its already wealthy shareholders.
The Federal Reserve’s 2024 stress-test results, which found that Capital One’s credit card portfolio is increasingly vulnerable to macroeconomic swings that could undermine its financial viability, highlights why federal regulators should block its proposed merger with Discover.
The Americans for Financial Reform Education Fund said in an April 15 letter that the OCC is still too predisposed to approve deals, despite the focus on negative merger characteristics in the national bank regulator’s proposed policy statement. “The thematic flaw in the proposed policy statement is that its fundamental orientation is to approve mergers and not to evaluate merger applications,” the group said.
Alexa Philo and Patrick Woodall of Americans for Financial Reform: “Picture a new megabank with all the advantages and dangers of a too-big-to-fail institution. Now imagine it had the market power to bully merchants through its ownership of a payment network for debit and credit cards. Finally, throw in a track record of gouging its own customers. That’s exactly what we will have if Capital One succeeds in taking over Discover Financial Services.”
AFREF, joined by the Center for Economic Policy and Research and United for Respect, sent a comment letter responding to the FTC and DOJ’s request for information on merger enforcement. The letter calls on the agencies to to closely scrutinize and create presumptions to challenge acquisitions that employ leveraged buyouts and techniques like it.
The Fed must aggressively attempt to retain institutional credibility as a neutral actor in our economic order with regards to the distributional effects of its policies. It should not help finance a merger wave that leads to large-scale consolidation of companies which would have been healthy competitors but for temporary impacts of the current crisis.