Frank asks for closer look at big bank merger

Rep. Barney Frank (D-Mass.) is calling on the Federal Reserve to give the public more opportunity to consider a proposed bank merger.

In a letter sent to Fed Chairman Ben Bernanke Wednesday, the ranking member of the House Financial Services Committee threw his support behind a coalition of community, consumer and housing groups, which have aired skepticism about the deal.

Specifically, Frank said the public comment period on the pending acquisition of ING Direct by Capital One should be extended by at least 60 days and a series of public hearings should be held to explore its impact.

"This proposed purchase would create the fifth large bank in the United States," Frank wrote. "For this reason alone, care should be taken to thoroughly examine the impact of this purchase."

Frank's letter comes two days after a coalition of 18 groups similarly asked for a longer comment period, as well as at least five hearings held in major cities to discuss what it might mean for consumers and whether it would be creating another "too big to fail" institution.

Extending the review timeline will allow regulators to review the deal and make sure it meets all new requirements under the Dodd-Frank financial reform law, and also allow the newly authorized Consumer Financial Protection Bureau to review the two banks for any potential problems with their consumer credit card practices, the groups argued.

They also pointed out that the National Community Reinvestment Coalition, which is leading the effort, has filed a complaint against Capital One, charging that the bank violated fair lending laws. The U.S. Department of Housing and Urban Development is currently investigating the claim.

Capital One announced it was buying the American arm of the Dutch bank for $9 billion in June, but the move still requires final approval from banking regulators. European banking regulators required ING Groep NV to sell off its American business as a condition of it receiving government aid during the financial crisis.

In response to the letters, a Capital One spokesperson said charges that the deal would make the bank systemically important are "baseless," and that the bank used "prudent" management to steer clear of exotic mortgage products that contributed to the financial crisis.

"We have worked diligently over time to manage risk and to ensure that our balance sheet is sound and the company is well capitalized," said spokesperson Tatiana Stead. "The combined organization will remain well below the trillion dollar balance sheets of the largest U.S. banks and will not engage in the types of risky investment banking activities that can generate systemic risk."

This post updated at 11:37 am.

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