Regulating Bank Mergers

Past and Present

For the first time in decades, bank merger policy stands at a crossroads. Amidst a new and wide-ranging antimonopoly movement, concerns regarding concentrated financial power and the structure of the American banking system have taken center stage. Following calls for public comment on revising the 1995 Bank Merger Competitive Review Guidelines by the Department of Justice, internal discord over reform efforts at the Federal Deposit Insurance Corporation (“FDIC”), and the failure of numerous regional banks, a fundamental reassessment of the law governing bank mergers and acquisitions is firmly underway. While some policy-makers and scholars have argued that antitrust law should play a larger role in preventing consolidation in the financial sector, this Article employs the methodology of legal history to emphasize the limits of reviving antitrust in banking.

Excavating the origins and evolution of the Bank Holding Company Act (the “BHCA”) and the Bank Merger Act (the “BMA”), which govern regulatory oversight of bank mergers, reveals that an expansive conception of the public interest extending well beyond the bounds of antitrust doctrine guided the bank merger regime in its formative early years. By retracing the legislative, administrative, and judicial interpretations of the public interest approach to bank mergers, this Article foregrounds an alternative, and historically potent, mechanism through which to combat banking consolidation. Ultimately, the complex history of the BHCA and BMA provides an important reminder that while antitrust has long served as a critical weapon in the battle against concentrated economic power, it has not been the only weapon. As the future of bank merger policy hangs in the balance, a turn to the past may therefore yield a more promising way forward.

* Associate Professor of Law, Arizona State University, Sandra Day O’Connor College of Law, J.D., University of Michigan Law School, Ph.D., Boston University. For invaluable comments and conversations, the author thanks William J. Novak, Louis Ferleger, Saule Omarova, Jeremy Kress, David Zaring, Brian D. Feinstein, Talia Gillis, Paolo Saguato, Adam Feibelman, Hilary Allen, Jeffery Zhang, D. Daniel Sokol, Erin Scharff, Zachary Gubler, and participants in the ASU Law Junior Scholars Workshop, Wharton Financial Regulation Workshop Series, and the AALS Emerging and New Voices in Financial Regulation Panel. Thank you also to the editors of the University of Illinois Law Review for their excellent editorial work.

The full text of this Article is available to download as a PDF.