Capital One announced Monday that it was acquiring a rival financial services company in a massive stock deal as Americans continue to struggle with credit card debt, according to The New York Times.
The McLean, Virginia-based bank announced it would acquire Discover Financial Services in an all-stock transaction worth $35.3 billion, The New York Times reported. Acquiring Discover would give Capital One more market power because Discover has its own payments network at a time when credit card debt continues to mount for consumers. seconds in the Wall Street Journal.
The takeover could face a major hurdle from federal regulators, The New York Times reported. The Comptroller of the Currency announced i wanted it loosen up the mergers and acquisitions approval process on January 29.
$34.2 trillion in debt and Capital One is merging with Discover to combat a rise in loan defaults (defaults and delinquencies), but instead of giving taxpayers a break so they can pay off the record balance of their credit cards, we send more money than we make. I don't have abroad… pic.twitter.com/scxaIyZqXy
—EX Antoni, Ph.D. (@RealEJAntoni) February 19, 2024
“It's very hard to imagine how federal regulators could allow Capital One to buy Discover given the requirement that mergers benefit the public as well as insiders,” the president and CEO of the National Community told the New York Times Reinvestment Coalition, Jesse Van Tol.
Discover shareholders will receive a 26% premium over the company's closing stock price, getting just under 102 Capital One shares for every 100 Discover shares if regulators approve the acquisition.
The deal comes as total US household debt to hit $17.5 trillion in the fourth quarter of 2023. Credit card delinquencies of 90 days or more rose to 6.36% by the end of 2023, while total credit card debt rose to $1.13 trillion, seconds at the Federal Reserve Bank of New York.
“Credit card and auto loan defaults continue to rise above pre-pandemic levels,” New York Fed adviser Wilbert van der Klaauw said in a statement. “This indicates increased financial stress, particularly among younger and lower-income households.”
Capital One and Discover did not immediately respond to a request for comment from the Daily Caller News Foundation.
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