Financial services deals meet resistance from Democratic lawmakers

Schwab's acquisition of TD Ameritrade and Morgan Stanley's deal for ETrade have elicited criticism from Sen. Sherrod Brown and Rep. Maxine Waters

Two major acquisitions in the financial services industry over the last few months are likely to meet resistance from Democratic lawmakers.

In November, Charles Schwab Corp. announced it would acquire TD Ameritrade for $26 billion. Last month, Morgan Stanley announced a $13 billion deal to buy ETrade. The latest examples of Wall Street streamlining are raising Democratic concerns.

“Under President Trump’s watch, these types of mergers, on the heels of other consolidation of the financial industry such as the BB&T and SunTrust merger, harm investors and savers, decrease competition and increase risks to the financial system,” Sen. Sherrod Brown, D-Ohio and ranking member of the Senate Banking Committee, said in a statement. “Hardworking Americans will pay the price when their risky activities blow up the economy again.”

Matthew Keyes, a spokesman for Mr. Brown, said that his statement applied to both the Schwab-TD Ameritrade and Morgan Stanley-ETrade deals.

As the top-ranking Democrat, Mr. Brown is an important voice on the Senate committee overseeing Wall Street. But since Republicans control the panel, he doesn’t have the power to call hearings.

The Department of Justice is examining the Schwab-TD Ameritrade union. A DOJ spokeswoman did not respond to a request for comment.

Schwab spokesman Glen Mathison said the company is “cooperating fully with the government in its review” of the Schwab-TD Ameritrade acquisition.

“We believe the transaction will be beneficial to investors and to the independent registered investment advisers who serve them,” Mr. Mathison said in a statement. “For over 40 years, our respective companies have been dedicated to delivering better value, service and experiences to investors and advisers, and nothing about that will change with the combination of the two companies into one. The industry is and will remain dynamically competitive.”

Mr. Brown’s statement demonstrates the misgivings about financial firm mergers among Senate Democrats, which complement those raised recently by House Financial Services Committee chairwoman Maxine Waters, D-Calif.

In a Feb. 21 statement, Ms. Waters said the Morgan Stanley-ETrade deal “would be the largest acquisition by a megabank since the devastating 2008 financial crisis, providing new sources of revenue for Morgan Stanley at a time when megabanks are making record profits. This is especially concerning given the impact this merger could have on financial stability and the economy, as well as consumers, investors, employees and communities across the nation.”

“The Financial Services Committee will be closely monitoring the regulatory review of this proposed merger and I continue my call on prudential regulators to put consumers first,” she added.

Ms. Waters noted that in the past year, she has convened has six hearings of the committee to question big bank executives, as well as regulators, about market stability and investor protection.

“Expect congressional hearings as soon as March,” Jaret Seiberg, managing director of the Cowen Washington Research Group, wrote in a Feb. 20 analysis when Morgan Stanley announced that it was buying ETrade. “We believe the CEOs will be called to justify the deal.”

A spokesman for Ms. Waters did not respond to a request for comment. A spokeswoman for Morgan Stanley declined to comment.