Elizabeth Warren Ditches Consumer Welfare In Support of Big Banks

Sen. Elizabeth Warren (D-Mass.) loves to cast herself as the ultimate public defender of consumers and the arch-nemesis of bankers on Wall Street. 

However, with her recent record opposing popular mergers and shutting down regulatory reform for Bitcoin and its crypto-offspring, Warren has sided more with the major banks rather than new players that stand to empower consumers.

In the last month, Warren has used her perch in the Senate to oppose the repeal of the Securities and Exchange Commission’s Staff Accounting Bulletin 121, which would have allowed financial institutions to more safely hold cryptocurrencies. She’s also moved to shut down Senate debate on the House-passed Financial Innovation and Technology for the 21st Century Act, the first substantial federal framework for digital assets.

In the same vein, Warren opposed the prospective merger between Discover and Capital One Bank, the first serious joint venture that could have rivaled the payment networks of Visa, Mastercard, and American Express. 

Warren, along with left-leaning groups like Americans for Financial Reform and the American Economic Liberties Project, claims the acquisition will stifle competition and harm consumers by creating the largest U.S. credit card issuer in terms of assets.

Their coalition argues Capital One would hike merchant fees and make its users pay higher for using their cards, saddling millions of customers with high-interest debt they could never hope to pay off. 

This critique misses a crucial point: the real threat to competition comes from the entrenched banks that already have dominant market positions, not from the emergence of new competitors that may offer better products.

Many of the large banks with a power base in Washington, D.C. have flexed their regulatory muscle to stop the merger from happening, for the precise reason that it would lead to more competition in a highly regulated space.

In a recent American Banker article, Intrepid Ventures’ Eric Grover made this very case, “The other goliath banks don’t want the deal to go through because they’ll face a more formidable competitor.” Combining the customer base of Capital One banking and credit customers with a dedicated payment network in Discover would unlock some needed competition for payment rails using either debit or credit cards.

In opposing the deal, Warren is purporting to save consumers from yet another “too-big-to-fail” bank, but rather than protecting the little guy, she’s depriving each and every one of us from accessing additional financial service options.

Warren’s position protects big banks from having to innovate and compete and allows them to keep costs high and choices limited for consumers. This isn’t a minor oversight. It raises serious questions about Warren’s true motivations.

In pursuing a centralized, highly regulated financial services sector, Elizabeth Warren has become a warrior for the incumbents rather than the upstarts. She’s chosen to fight for the boardrooms rather than consumers and their wallets.

Despite Warren’s best efforts, the financial landscape is evolving, with digital wallets and flexible credential technologies from companies like Visa and Curve, which offer consumers unprecedented flexibility at checkout. They’re also working to protect consumer privacy by issuing virtual numbers to avoid identity theft. 

FinTech services have slowly gained adoption across the country, providing new ways to consumers to fund their lives and save for their families.

A merger could harness these technologies and provide merchants with more routing options that lead to potentially lower costs for both the provider and the consumer. More choices at the point of sale mean greater competition among the card networks for your loyalty. 

That means an arms race to improve rewards programs.

Despite this potential upside, Warren insists the acquisition can only harm consumers.

The Federal Reserve and the Office of the Comptroller of the Currency (OCC) have extended the public comment period for this acquisition, ensuring a more thorough review. Hopefully, this will allow consumers time to have their say in voicing the need for more competition in the banking sector.

Competition could take the form of innovation in the adoption of cryptocurrencies, a key demand of millennials and minorities who are more likely to hold these assets. It’s an undeniable next frontier for FinTech and banking services which give consumers more control of their money.

Elizabeth Warren’s opposition to the Capital One-Discover acquisition, framed as consumer protection, is actually a defense of the entrenched Wall Street giants who oppose it. 

It’s past time to hold Warren and her cadre of manipulators accountable. Allowing this acquisition to proceed could foster a more competitive and innovative financial sector that benefits all consumers. That’s a goal we should all be able to agree on.

Yaël Ossowski is deputy director of the Consumer Choice Center, a global consumer advocacy group.

Published in RealClear Markets (archive link #1, #2)