2nd UPDATE: Fed Sets Meetings On Capital One Plan To Buy ING Direct USA
August 26 2011 - 6:05PM
Dow Jones News
The U.S. Federal Reserve said Friday that it will hold three
public meetings on Capital One Financial Corp.'s (COF) plan to buy
ING Groep NV's (ING, INGA.AE) U.S. online-banking business, ING
Direct USA.
In addition, the Fed said it has extended the period for public
comment on the proposal through Wednesday, Oct. 12.
The Fed announcement comes as some consumer advocates, ING
customers and at least one U.S. lawmaker have voiced concern about
the deal.
The three meetings, set to help the Fed collect more information
on the proposal, will be held in Washington, D.C., Chicago, and San
Francisco.
The Fed, in a notice late Friday, said it wants to understand
whether the acquisition will produce benefits to the public such as
increased competition. It said it also wants to weigh any benefits
against any possible adverse effects, such as unsound banking
practices or risk to the U.S. financial system.
Some ING customers have voiced concern about the deal on ING
Direct's Facebook page.
"Why do good things have to disappear? They get swallowed up by
giants. That stinks," reads a June comment, one of almost 600
comments responding to a link to ING's June 16 announcement of the
acquisition.
Consumer advocates and Rep. Barney Frank (D., Mass) have urged
the Fed to slow down or reject the acquisition. In a letter sent
Aug. 17 to Fed Chairman Ben Bernanke, Frank, the top Democrat on
the House Financial Services Committee, said "care should be taken
to thoroughly examine the impact this purchase with respect to the
consolidation of banking assets, the provision of credit by the
resulting back" and compliance with a federal law mandating
investment in low-income neighborhoods.
In an interview Friday, John Taylor, chief executive of the
Washington-based National Community Reinvestment Coalition, said
allowing Capital One to purchase the ING online banking business
would increase the risks to the financial system by creating a
larger financial institution that could threaten the health of the
financial system. He argued that regulators should block the
merger, or at least put conditions on it that requires Capital One
to invest in local communities.
"This is a credit card company acquiring banks so it can do more
credit-card lending," he said.
The Washington, D.C., meeting will be held Tuesday, Sept. 20.
The Chicago meeting is set for Tuesday, Sept. 27, and the San
Francisco meeting is slated for Wednesday, Oct. 5.
"The Federal Reserve's review also includes an evaluation of the
financial and managerial resources of the acquiring firm," the Fed
said.
Capital One, currently the ninth-largest bank in the U.S. by
deposits, is set to pay $9 billion for ING Direct USA--$6.2 billion
in cash and $2.8 billion in stock. The McLean, Va., bank has also
announced plans to buy the U.S. credit-card business of HSBC
Holdings PLC for about $2.6 billion.
Capital One, in a statement, said it respects the Fed's decision
to extend the comment period and hold hearings.
"We believe that the benefits of this transaction to our
customers, communities and the economy will be significant, and we
look forward to telling our story," the company said in a
statement. It added that it will remain "a traditional bank" with
only 1.5% of deposits nationwide and none of the complexity that
the Dodd-Frank reform bill addressed in ending "too big to
fail."
The company also said that in its prior acquisitions, it has
substantially increased its investments that serve lower-income
communities.
"The record includes scores of letters of support from community
groups attesting to this fact," said Capital One, adding that it is
"adding thousands of jobs to the economy at a time when many
financial services companies are announcing sizable
reductions."
-By Maya Jackson Randall, Dow Jones Newswires; 202-862-6687,
maya.jackson-randall@dowjones.com
--Alan Zibel and Matthias Rieker contributed to this report.
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