Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. The Biden administration is starting to sound a little more accommodating when it comes to potential bank mergers. Here’s what you need to know before we hear lawmakers and regulators duke it out at this week’s four SVB-related hearings. Treasury Secretary Janet Yellen said in a Reuters interview Friday that the current episode of banking turmoil “might be an environment in which we're going to see more mergers.” “That's something I think the regulators will be open to, if it occurs,” she said. Yellen’s comments are notable because one of President Joe Biden’s defining economic initiatives has been to ratchet up scrutiny of big corporate mergers. Canada’s Toronto-Dominion nixed its takeover of U.S. regional bank First Horizon just two weeks ago, saying it couldn’t provide a clear timetable for regulatory approvals. Progressive lawmakers have urged regulators and administration officials to take a hard line with big bank mergers in particular. But it may become harder to reject more banking consolidation as the industry continues to reel from interest rate hikes and deposit runs. The TD-First Horizon deal went down, but the government also allowed JPMorgan Chase to buy First Republic to help stabilize the system earlier this month. Wall Street dealmakers and bank lawyers will be looking for clues on what it all means when top bank regulators from the Fed, FDIC and OCC testify in the House tomorrow and in the Senate Thursday. Acting Comptroller of the Currency Michael Hsu will tell lawmakers this morning that recent banking instability presents an opportunity to shape “a more competitive, more community-oriented, and more resilient banking system.” But he’ll add that his agency is “committed to being open-minded" when considering merger proposals. "The forces are all there for bank consolidation,” former Trump-era acting Comptroller of the Currency Keith Noreika, who leads U.S. banking work at Patomak Global Partners, told MM. “There are too many banks, and there are not a lot of other options to recapitalize those that are going to face tougher sailing with higher interest rates." Watchdog groups are vowing to fight back, meaning the Biden administration and regulators will face some degree of resistance if they turn to consolidation to shore up the industry. Americans for Financial Reform senior policy analyst Alexa Philo said “we should be talking about making the biggest banks a lot smaller.” Open Markets Institute executive director Barry Lynn said Yellen's comments “will not age well." “The recent costly bank failures, bailouts and rescues prove [Secretary] Yellen is wrong,” Better Markets President and CEO Dennis Kelleher said. “The last thing this country needs is more bank mergers that create yet more too-big-to-fail banks that threaten the country’s financial stability and the economy.” It’s Tuesday — Please send tips: Zach Warmbrodt, Sam Sutton.
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