Sources say Janet Yellen may need more mergers with bank CEOs

New York (CNN) During a meeting Thursday with the CEOs of major banks, Treasury Secretary Janet Yellen told executives that the industry’s continued journey through the crisis may require more bank mergers, two people familiar with the matter told CNN.

Yellen’s comments provide further evidence that Biden officials are beginning to warm to the idea of ​​bank mergers, despite the concerns of progressives and the administration’s own studies of corporate concentration.

The worst banking crisis since 2008 has been marked by repeated bank failures, falling share prices and concern about the business model of regional and medium-sized banks. Regulators, of course, prefer corporate mergers where strong banks take over weak banks rather than destabilize bank failures.

“Consolidation is inevitable,” says Ed Mills, a Washington policy analyst at Raymond James. “Progressive backlash is a Catch-22.”

In this background, Yellen met in Washington Thursday with JP Morgan Chase CEO Jamie Dimon, Citigroup CEO Jane Fraser and other board members of the Bank Policy Institute.

The Reading In a Treasury Department briefing following the meeting, Yellen addressed bank pressure, reaffirmed the “strength and stability of the U.S. banking system” and thanked bankers for “their leadership and support.” But that reading does not mention the discussion of bank links.

However, sources told CNN that bank mergers were discussed during Yellen’s meeting with bank CEOs.

Yellen echoed the views of U.S. regulators who said bank mergers were likely in the current environment, a person familiar with the matter said.

In light of recent events, Yellen also expressed confidence that the nation’s diverse banking system, which includes institutions of many sizes, is on solid footing.

The Biden administration has tried to curb corporate concentration, and regulators have moved to block it JetBlue acquires SpiritMicrosoft A $69 billion acquisition Video game publisher Activision Blizzard and other major affiliates.

Earlier this month, regulators allowed JPMorgan Chase, the nation’s largest bank, to buy a majority stake in First Republic. Second largest bank A failure in American history. The deal, which came after a competitive bidding process aimed at stabilizing the system, drew sharp criticism from some progressives.

“What happened here was that a bank was under control and started to fail, and the federal government helped JPMorgan Chase get even bigger.” Massachusetts Democratic Senate. Elizabeth Warren told CNN. “It may look good today when everything is flying high, but in the end if one of those giant banks, JP Morgan Chase, starts to falter, the American taxpayer will be on the line.”

Responding to CNN’s report on Friday, Dennis Kelleher, co-founder of financial reform think tank Better Markets, expressed concern about further bank consolidation.

“No mergers should be allowed, resulting in a very big-fail-fail problem. It only sows the seeds for the next crisis, which will be much worse,” Kelleher told CNN.

‘No one wants to be a hero’

During an interview Reuters This week, Yellen said a certain degree of consolidation could occur in the regional and mid-sized banking sector.

“It could be an environment in which we’re going to see more mergers and, you know, if that happens, I think regulators will be open,” Yellen told Reuters.

Michael Hsu, Comptroller of the Currency, He told the legislators Earlier this week his company was ready to consider bank mergers as soon as possible.

Hsu told the Senate Banking Committee that the Office of the Comptroller of the Currency is “obliged to be open-minded when considering merger proposals and to act on applications in a timely manner.”

Mills, a Raymond James analyst, said investors had shied away from the regional banking sector as new regulations, rising deposit costs and shareholders were wiped out after recent bank failures.

“No one wants to be a hero,” Mills said. “Without any warning, some banks went from some of the best-regarded lenders in the industry to zero. This has spooked investors a bit.”