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Elizabeth Warren

Capital One merger is one big test for the Capitol

A proposed merger between two giants of the credit card world comes at a tense moment for Washington and Wall Street, making it one of the country’s most politically charged bank mergers in years.

Capital One Financial announced over the weekend it had secured an agreement to purchase Discover Financial Services in a $35.3 billion deal.

Lawmakers are just beginning to weigh in on the deal. Sen. Elizabeth Warren (D-Mass.) wrote on X that the merger should be blocked, arguing the transaction “threatens our financial stability, reduces competition, and would increase fees and credit costs for American families.” Senate Banking Committee Chair Sherrod Brown (D-Ohio) warned regulators away from a “rubber-stamped merger.”

The deal isn’t significant simply for the size of the would-be bank, which could eclipse JPMorgan Chase as the country’s biggest card lender by market share.

Crucially, Discover owns a discrete payment network, one that’s much smaller than the massive networks run by Mastercard and Visa, to be clear. But that system, coupled with the combined loan balances of the two institutions, will make Capital One a much heftier competitor in this business.

That shakeup is going to attract a lot of regulatory attention from bank regulators and antitrust officials at the Justice Department. The Biden administration has generally tried to signal a more aggressive posture toward mergers in general, but left-leaning lawmakers have urged the White House to do more.

We’ve written elsewhere about Capital One’s unique lobbying footprint in Washington. The Virginia-based, $478-billion-asset institution spent more than $2.5 million lobbying the Hill in 2023 — far more than most banks of its size.

Much of the bank’s lobbying revolves around credit card policy and legislation — particularly the Credit Card Competition Act from Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.). The banking industry is staunchly opposed to that bill.

But Capital One signaled broader ambitions last year. A lobbying disclosure filed by 1607 Strategies reported part of the firm’s work would center on “issues related to competition policy and antitrust laws.”

Of note: One lobbyist listed on that disclosure — Travis Johnson, managing principal at 1607 Strategies — touts a “strong working relationship with current Speaker Mike Johnson” after serving as chief of staff for former Sen. David Vitter (R-La.), per the firm’s website.

— Brendan Pedersen

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