The Department of Justice was poised to be a thorn in the side of banks if Democrats kept the White House, as the antitrust division had gotten unusually aggressive under President Biden.
But President-elect Donald Trump's nominee to lead the DOJ's antitrust team is raising hopes inside the banking industry that the department's view on mergers will be as boring as it used to be — paving the way for more bank consolidation.
Trump this week picked Gail Slater, an antitrust lawyer and advisor to Vice President-elect JD Vance, to become assistant attorney general for the DOJ's antitrust division.
If she's confirmed by the Senate, Slater is generally expected to adopt a tougher approach to the tech industry than previous Republican administrations did. In his Truth Social post announcing Slater's nomination, Trump said, "Big Tech has run wild for years, stifling competition in our most innovative sector."
Earlier in her career, Slater did a stint at a tech lobbying firm. But analysts expect her approach to fall more in line with the tone taken by Vance, himself a former venture capitalist, who has called for more aggressive antitrust enforcement in a sector that he argues has censored conservative views.
The question now is whether that more populist view on consolidation will carry over into banking, an area where the DOJ traditionally took a less active approach prior to the Biden administration.
"We're optimistic, but only time will tell," said Morgan Harper, director of policy and advocacy at the progressive-leaning American Economic Liberties Project, which has applauded the DOJ's tougher tone on bank mergers.
The shift has happened under Jonathan Kanter, the current head of the antitrust division, which has battled Google, Apple and Ticketmaster, among others. Kanter's skepticism of bank mergers has drawn fewer headlines, but lawyers say it nonetheless made the M&A environment tougher — out of fear that the DOJ would block a bank's purchase of a competitor.
Under Kanter, the DOJ started applying somewhat tougher guidelines to deals that the agency deemed would make markets uncompetitive. And it shifted away from telling companies whether certain actions, such as selling a part of a business that majorly overlaps with that of a competitor, would appease the DOJ.
Critically for banks, the DOJ made it clear that "it felt free to depart" from how bank regulators viewed a particular deal, said Gregory Lyons, a banking lawyer at Debevoise & Plimpton.
Regulators at the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency all perform their own assessments of whether mergers will make a market significantly less competitive.
But Kanter has indicated the DOJ could be less willing to go along with regulators' views and instead sue to block a deal even after bank regulators approved it.
Analysts say Slater — whose time in the private sector includes stints at Fox Corp. and Roku — will bring a practical approach to DOJ that is at least more receptive to industry views.
While populist concerns will no doubt influence its decisions, the DOJ is unlikely to take the automatic view that "big equals bad," said Ed Mills, a policy analyst at Raymond James. And Slater's practical approach makes it "exceptionally unlikely" that the DOJ will challenge a deal that regulators at the Fed, FDIC or OCC have signed off on, he said.
"It puts the center of gravity back towards the federal banking regulators," Mills said, adding "that certainty is really important" for banks.
Policy concerns were far from the only issue that slowed down bank merger activity over the last four years. Rising interest rates put strains on some banks' portfolios, and concerns over a recession that never came dampened banks' appetite for absorbing competitors' loan portfolios.
But aside from Capital One Financial's pending purchase of credit card competitor Discover Financial Services, banks have been shying away from announcing blockbuster mergers.
The stock prices of both Capital One and Discover have shot up since the election, as investors see a higher likelihood that the Trump administration will approve the $35 billion merger.
Analysts generally see a higher chance that the Capital One-Discover deal will be approved, but they say it's not a slam dunk. Raymond James' Mills, for example, pointed to Missouri Republican Sen. Josh Hawley's opposition to the merger as a sign of skepticism
But most banks do not have large credit card businesses, Mills noted, making it less likely that such concerns would affect a more run-of-the-mill bank deal.
