Capital One, community groups square off in public meeting on Discover deal
Recasts to reflect that meeting has begun, adds comments by Capital One CEO, head of nonprofit coalition, details, paragraphs 1, 4, 6-8 and 10-11
Deal could boost competition but may reduce services and increase costs, say opponents
Capital One commits $265 billion over five years to lending, philanthropy, and investment
Community support could positively affect regulators' views, M&A experts say
By Michelle Price, Pete Schroeder
WASHINGTON, July 19 (Reuters) -Capital One COF.N CEO Richard Fairbank and other executives went head-to-head with community groups at a public meeting on Friday convened by regulators to discuss the bank's tie-up with Discover Financial Services DFS.N.
Unveiled in February, the $35 billion deal will create the biggest U.S. credit card issuer by balances, the sixth-largest bank by assets, and will give Capital One control of Discover's card payment network, the fourth major payment network operator.
Virginia-based Capital One and other proponents say the deal could boost card payments competition but opponents fear it will reduce services, increase costs for Americans and threaten financial stability by creating another too-big-to-fail bank.
“We believe this acquisition advances financial stability and increases competition in the industry, while also providing significant new benefits in the communities in which we operate," said Fairbank in opening remarks at the all-day hearing.
The Federal Reserve and Office of the Comptroller of the Currency (OCC), which are under political pressure to be tough on mergers, are holding Friday's meeting in a rare move reserved for the most contentious merger reviews.
The meeting offers a forum for the public to weigh in on the deal, giving opponents an opportunity to ramp up pressure on regulators.
Top congressional Democrat Maxine Waters was scheduled to speak against the deal, according to the Fed's agenda, along with a slew of community and advocacy groups.
"This merger is a terrible, horrible, no good, very bad idea," said Jesse Van Tol, CEO of the National Community Reinvestment Coalition, a powerful coalition of nonprofits. He cited financial stability concerns and worries the deal would ultimately hurt consumers.
Reuters reported on Wednesday that Capital One had committed $265 billion over five years to lending, philanthropy and investment if the takeover goes through, as it tries to appease critics and win over regulators.
That community benefits plan is more than twice as big as any to date, according to data from the NCRC which negotiated all previous plans. Van Tol dismissed the plan on Friday, saying it largely comprises credit card and auto lending that the banks already provide.
Speaking to Reuters this week, Andres Navarrete, Capital One's head of external affairs, said he believed the regulators care deeply about the plan, and that credit card and auto loans are key products for consumers that meet essential needs.
The Fed and OCC assess the deal's impact on the convenience and needs of affected communities, as well as financial stability, and competition, among other issues. The Justice Department also provides its view on the antitrust implications.
That process could take several more months, said regulatory experts.
Beyond Capital One and Discover executives, several Virginia state lawmakers and advocacy groups are expected to speak in favor of the deal, according to the agenda. Vocal support from civil rights or community groups could be helpful for Capital One.
"Community support ... positively affects the regulators' views of the transaction," said Chip MacDonald, an M&A lawyer and managing director at MacDonald Partners.
"Where antitrust concerns are present, this could also be a basis for a bank regulator finding that the public benefits of the merger outweigh the competitive concerns."
Reporting by Michelle Price and Pete Schroeder in Washington; Editing by Stephen Coates and Matthew Lewis
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