Bank Mergers May Get Tougher to Do

A tougher approach to bank deals

Today could be a turning point for how regulators look at banking consolidation.

The board of the F.D.I.C. is expected to vote on whether to adopt more stringent guidelines for evaluating deals in the sector — and the commission’s Democratic majority is likely to vote in favor, a person with knowledge of the matter told DealBook’s Lauren Hirsch. The Justice Department is expected to get tougher on such transactions, too.

Here’s how the F.D.I.C.’s approach would change:

• It would consider a deal’s effects beyond geographic concentration of customer deposits, including on small-business lending on certain groups of customers.

• The regulator would request more data to back up a deal’s purported benefits, such as by allowing a bank to increase its lending limits. The agency could also more closely monitor whether those promises were upheld.

• Deals creating banks larger than $100 billion in assets would get heightened scrutiny, with an eye on how interconnected the bigger bank would be with the financial system.

One thing worth noting: While the F.D.I.C. is one of three regulators that approve banking deals, it doesn’t have oversight over some transactions, such as Capital One’s $35.3 billion deal to buy Discover Financial Services.

The Justice Department is planning its own overhaul, Jonathan Kanter, the agency’s top antitrust official said at a Semafor event last night. The department intends to withdraw from a 1995 framework that outlines how it evaluates bank deals. Instead, it will scrutinize bank mergers using the updated, tougher guidelines it uses for every other deal.

The Justice Department doesn’t have direct authority to approve a banking deal. But other regulators often refer to its competitive analysis in making their decisions.

Bank merger regulation has become a more divisive topic after last year’s regional banking crisis. The debate is reflected in commentary about the F.D.I.C’s proposed changes:

• Sheila Bair, a former chair of the F.D.I.C., wrote that the proposed rule would have “a chilling impact on positive M&A banking activity, including among regional banks where consolidation could strengthen their ability to compete with the mega banks.”

• Senator Sherrod Brown, the Democratic chair of the Senate Committee on Banking, Housing and Urban Affairs, supported the proposal. “Bank executives propose mergers when they’re good for business,” he wrote. “It’s the job of agencies like yours to make sure that they’re also good for consumers and communities.”

HERE’S WHAT’S HAPPENING

Markets raise their bets that the Fed will make a jumbo rate cut. Expectations have risen sharply among futures traders this morning that the central bank will announce a half-point interest rate cut on Wednesday, even as Wall Street economists are sticking with their call for a more modest move. The debate continues ahead of Tuesday’s retail sales report.

Meta plans to ban Russian media outlets from its apps. The social media giant said on Monday that it would block organizations including RT, a state-backed company, from Facebook, Instagram and WhatsApp for carrying out covert influence campaigns. The move could happen in the next few days and comes as the Biden administration has cracked down on RT ahead of the election.

The European Commission names a new antitrust regulator. Teresa Ribera, a deputy prime minister of Spain, will become the European Union’s top competition regulator, succeeding Margrethe Vestager, who was viewed as one of the world’s most aggressive antitrust officials. The appointment was announced a day after Thierry Breton of France, who oversaw internal markets policy, resigned, citing “questionable governance” in Brussels.

Intel buys itself time

Shares in Intel are up more than 6 percent in premarket trading on Tuesday after the embattled chipmaker made a flurry of big announcements on Monday.

News that Intel had signed up Amazon and the Pentagon as big customers certainly helped. But the company also laid the groundwork for potential deal making, DealBook’s Michael de la Merced hears.

Wall Street especially cheered the Amazon announcement. The tech giant will use Intel’s nascent foundry operation, which makes chips for outside customers, to manufacture at least two semiconductors for its giant cloud-computing division. It’s a sign that Intel may be able to compete against Nvidia, the dominant player in chips for artificial intelligence services.

Intel also said that it had been awarded up to $3 billion in funding under the CHIPS and Science Act to make processors for the U.S. military. (That announcement was confirmation that the company will continue to be a key partner to the Biden administration’s efforts to increase domestic chip production.)

There are cost cuts as well, notably from pausing construction of plants in Germany and Poland by two years. That’s on top of the more than 15,000 jobs the company plans to shed.

Intel also suggested that there may be more deals:

• While the company isn’t going to spin off the foundry business, it is going to make it an independent subsidiary with its own board, Pat Gelsinger, the company’s C.E.O., wrote in an internal memo. That will allow the unit to raise money from outside investors, though there are no talks about that underway at the moment. Such a move would make it easier to spin out the division in the future, though.

• Intel also reiterated plans to sell part of its stake in Altera, a chipmaker it bought in 2015 and now intends to take public.

• One thing that isn’t on the table is a sale of Intel’s stake in Mobileye, a publicly traded maker of autonomous driving technology, DealBook hears.

Will this give Intel breathing room with investors? While Intel’s stock is up on Tuesday, it’s still down 58 percent this year.

One thing to watch: whether Intel faces pressure from activist shareholders. The company isn’t dealing with any right now, DealBook hears. But if these plans don’t pan out, they may come knocking.

Trump goes crypto

The economy is a dominant issue for voters, yet neither candidate has revealed much about how their policies might improve household finances.

Donald Trump, whose poll numbers are slipping, has put his distinct twist on the debate by hailing decentralized finance as a way to enhance U.S. dominance in crypto — and to make a buck.

It’s part of the Trump family’s new venture. The former president unveiled World Liberty Financial, a crypto business, last night during a two-hour livestream on X. “Crypto is one of those things we have to do,” Trump said. “Whether we like it or not, I have to do it.”

Trump once derided crypto as a “scam” but has since embraced the industry and its money. Big-name crypto executives have backed him, and Fairshake, a super PAC supported by the industry, has raised $150 million to elect pro-crypto candidates.

Trump has been plugging his crypto announcement for days, and he took a swipe at Big Finance — once unheard-of for a Republican candidate — saying his new company would “be leaving the slow and outdated banks behind.”

But DealBook has questions about the new enterprise and about Trump’s embrace of crypto:

Stablecoins and the dollar: World Liberty Financial’s stated aim is to drive “the mass adoption of stablecoins,” digital tokens that are pegged to a fiat currency, like the dollar. That peg has helped drive their usage as a hedge against more volatile crypto assets, such as Bitcoin.

But Trump and his running mate, JD Vance, have consistently warned that the dollar is too strong, and they have vowed to weaken it. They say that would lift manufacturing and lower the trade deficit.

Would dollar instability mess with the new business’s central premise? Or would such a risk be enough to keep Trump out of the currency markets?

The S.E.C. and crypto regulation: World Liberty plans to sell a kind of digital token that would enable it to raise money without needing to register first with the S.E.C. (as long as certain conditions are met). According to CNBC, 20 percent of the tokens have been allocated to the founders, including Trump and his children; the rest are to be sold (or offered as rewards) to the public. Strong demand could net the founders a solid return.

Would that influence how an S.E.C. under a Trump administration would develop rules for crypto trading? Watchdogs are concerned. Trump “would be able to push regulatory agencies to favor businesses he is involved in,” Danielle Brian, executive director of the Project on Government Oversight, told The Times.

Are Trump’s business ventures a side bet on Trump himself? Trump Media & Technology Group, his social media company, has traded like a meme stock tied to the former president’s political fortunes. It’s been volatile, but it has padded Trump’s paper wealth by about $2 billion. Would a Trump crypto enterprise draw in yet more speculators? And what about those trying to curry favor with a Trump administration 2.0?

Amazon’s orders for workers

Amazon, whose business and hiring soared during the pandemic, has become the first tech giant to order most of its employees back to the office full time.

Amazon’s C.E.O., Andy Jassy, set a Jan. 2 deadline to return to five days per week in the office. He told staff on Monday that it was easier “to learn, model, practice and strengthen our culture” in person.

Last year, Amazon required staff to be in the office for at least three days, but Jassy said the advantages of being on site had only become clearer since then.

It’s part of a broader restructuring. Jassy said the company would employ fewer managers to streamline operations and slash the number of meetings. And he unveiled a “bureaucracy mailbox” for workers to flag unnecessary processes or rules.

Companies in other sectors have also pushed for a return to pre-Covid norms. Wall Street banks, including JPMorgan Chase and Goldman Sachs, have led those efforts. “A lot of people are swinging back to this idea, ‘We were better off beforehand,’” Zach Dunn, the founder of the workplace management platform Robin, told The Times.

Could other Big Tech companies follow? Flexible work has been seen as a crucial way to recruit top talent. Apple, Google, Meta and Microsoft expect workers to be in two to three days a week, and many start-ups are completely remote. “Major tech companies will now think about their policy again, potentially, in light of Amazon making this change,” Rob Sadow, the C.E.O. of Flex Index, a company that tracks return-to-office efforts, told The Wall Street Journal.

Others are skeptical. “For every high-profile company canceling work-from-home, there’s others that seem to be expanding it,” Nick Bloom, an expert on work at Stanford University, told the BBC.

THE SPEED READ

Deals

• BP put Wind Energy, its onshore wind business in the U.S. that is valued at up to $2 billion, up for sale as it looks to shed underperforming renewables divisions. (FT)

• Harland & Wolff, the British company that built the Titanic, filed for bankruptcy. (NYT)

Elections, politics and policy

• A group of artificial intelligence pioneers has called for an international authority to police the technology. (NYT)

• The European Union plans to raise €40 billion in loans for Ukraine — with or without help from the U.S. (FT)

Best of the rest

• “How Inflation Fooled Almost Everybody” (The New Yorker)

• Sean Combs was arrested on Monday in Manhattan after a grand jury indicted the music mogul who has been accused by a former girlfriend of sexual and physical abuse. (NYT)

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