Prepared Remarks of CFPB Director Rohit Chopra at the 2023 American Economic Liberties Project Anti-Monopoly Summit

Many people in this room who call themselves anti-monopolists often look to history. There’s no question that the types of abuse and misuse of power from decades ago still ring true today. And our country undoubtedly has a long anti-monopolist tradition.

Today, I want to talk about a much more recent history. Recent history and the present illustrate the progress we’ve made, but also the challenges that still lie ahead. First, I want to tell you about a moment from five years ago when, for the first time, five new Commissioners were confirmed to the Federal Trade Commission, where we began to close the chapter on the era of inaction.

Then I want to talk about five days ago, this past Sunday: when five board members of the Federal Deposit Insurance Corporation took over First Republic Bank in one of the largest bank failures in history. The failures of Silicon Valley Bank, Signature Bank, and First Republic are clear signs of new work that we must begin.

I then want to close with five lessons that I’ve learned.

Five Years Ago

In the first week of May in 2018, almost exactly five years ago, brand new Commissioners arrived at the Federal Trade Commission. I was lucky to be one of them.

Over its hundred-year history, the Federal Trade Commission had a storied legacy of taking on illegal activity by some of the largest and most powerful firms in America. The papers in the FTC archives revealed many of the big confrontations, from Big Tobacco to Big Poultry and more.

But when the new Commissioners arrived five years ago, it was clear that history was becoming ancient history. The FTC had fallen into deep decay and disarray over four decades. While there were short spurts of hope, the agency had largely lost its credibility as a regulator and enforcer.

Actions by Commissioners and top leadership spanning multiple administrations revealed a disdain for Congress and the rule of law, ignoring laws and statutory directives. Commissioners decided to stop enforcing laws on the books, like the Robinson-Patman Act, because of their pro-monopoly predilections. Congress routinely enacted new laws to give the FTC powers to stop systemic abuses, like a new Made in USA rulemaking in 1994, but the agency did nothing with it and instead gave free passes to firms that lied about their labels.

Facially anticompetitive mergers regularly flew out of boardrooms and then flew right through the Commission. The FTC’s orders were being routinely violated, including by Big Tech firms, but without any action or response by the agency.

Rather than act to address nationwide or systemic harms, like wrongdoing in the opioid industry, abuses by for-profit colleges and the resulting student loan default crisis, the rise of unchecked commercial surveillance, and the epidemic of subprime mortgage lending, Commissioners reached a bipartisan consensus to watch from the sidelines. To make it worse, Commissioners targeted their scrutiny against small businesses, frequently strong-arming them into settlements. Believe it or not, rather than confront the dangerous consolidation creeping across the economy or the obvious fraud in so many sectors, the Commission targeted church organists, skating teachers, and even family dry cleaning establishments through its enforcement and regulatory activities.

But rather than give up, we acted. We started to say no to the failed status quo and to lay out a new vision, including for the digital era. That summer in 2018, with the help of a legal scholar who joined the FTC for a short stint, we began to scour the FTC library’s archives to figure out how to bring the FTC back to life.

We published an article that outlined how the FTC could resuscitate its authority to crack down on “unfair methods of competition” which previous Commissioners, on a bipartisan basis, de facto deleted from the statute without any Congressional authorization. The article, which definitely got some pushback, also argued for how to use a dormant rulemaking authority to restrict the use of non-compete clauses imposed on workers in sectors across the economy.

We voted against botched settlements that were giveaways to firms that egregiously broke the law, including where companies essentially could purchase immunity provisions for their top executives for billions of dollars. We produced a continuous stream of new ideas to make clear that we needed to revive the FTC.

Thanks to the analysis and advocacy of so many of you, it worked. We brought a bipartisan antitrust complaint, alongside state attorneys general from nearly every state, against Facebook. We rescinded policies from the Clinton and Obama eras that sabotaged the agency. We discontinued the attacks on dry cleaners and other local businesses. We finalized a Made in USA rule more than 25 years after Congress authorized it. More importantly, we revived enforcement of laws on the books to ensure fair treatment and fair dealing in both today’s economy – and tomorrow’s.

And guess what? You know that legal scholar who joined the FTC for a stint to write an article with me about restricting non-compete covenants? Her name is Lina Khan and she’s now the Chair of the FTC.

Five Days Ago

Let me fast forward a bit to five days ago. By law, as CFPB Director, I sit on another five-member Commission: the board of the Federal Deposit Insurance Corporation. This past Sunday, the FDIC was appointed receiver of First Republic Bank, a large $200 billion domestic systemically important bank (DSIB). JPMorgan Chase and other large banks submitted bids to the FDIC to purchase the failed firm. The Office of the Comptroller of the Currency quickly evaluated the Bank Merger Act statutory factors and approved JPMorgan’s application.¹ This was the third DSIB to fail in recent weeks. All resulted in quick mergers.

Bank failures and banking panics can be extremely painful. And not just for depositors – it can crush an economy. Banks provide the credit that small businesses need to finance construction equipment or a new restaurant and that households need to buy groceries and living expenses before the next paycheck clears. They also provide the payments infrastructure for our economy. Banks enjoy access to many public privileges, like deposit insurance and the Fed’s discount window. With those privileges come public obligations: to have real skin in the game to safely absorb losses on loans and investments (capital), to have quick access to cash to meet depositor outflows when needed (liquidity), to not gamble on speculative investments or own commercial companies (activities restrictions), and to fairly serve and meet the needs of the community (fair access and consumer protection). Banks are publicly chartered to serve our economy, not extract value from it.

During the last financial crisis, many of the biggest banks got even bigger through emergency mergers that provided a short-term solution, but certainly increased systemic risk and undermined competition over the long term. And they are bigger still today, after even more mergers, gaining extraordinary funding advantages and market-power because the government permitted them to become and remain too-big-to-fail. Despite a clear statutory directive after the crisis to now consider financial stability in bank mergers and acquisitions, regulators approved big acquisitions by Morgan Stanley, PNC, U.S. Bank, Silicon Valley Bank , and a massive merger between BB&T and SunTrust that created Truist.

New laws and old laws alike provide a roadmap for regulators to fix some of these problems, but many have been underutilized. For example, large banks must file living wills with regulators detailing how they could safely fail under Chapter 11 of the U.S. Bankruptcy Code without a government bailout. If the plans are not credible or if executing the plans would disrupt financial stability, the Federal Reserve Board and FDIC Board ultimately have the authority to shrink and simplify the firms. After the experience with SVB, Signature, and First Republic, firms much smaller and less complex than the Wall Street firms, I don’t think anyone truly believes the current plans filed by Wall Street firms are anything more than a fairy tale.² In fact, the emergency Credit Suisse-UBS merger and comments by Swiss policymakers all-but-confirm it.³ In addition, the Federal Reserve Board has the authority to require large banks to shed risky nonbank assets and business lines if the firm is not well-managed, for example after a spree of shoddy acquisitions.⁴ These are just two of the powerful and underutilized authorities that could be used to help undo some of the harms created by decades of lax merger review.

A few years ago, bank regulators started to deregulate again and neglect some of their statutory duties to watch over their supervised entities. In a report published last Friday by the Federal Reserve Board, a review of the Silicon Valley Bank failure revealed that the Fed’s deregulatory efforts “...impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory stance.”⁵ We are paying the price once again. Periods of financial instability tend to be mass concentration events, both through organic growth as customers run to too-big-to-fail firms and through emergency mergers and acquisitions. Strong financial stability safeguards ex ante are critical complements to a broader anti-monopoly strategy.

Five Lessons

So, what are the lessons I learned in common with the experience of both five years ago and five days ago?

First, when it comes to curbing abuses, the answer may be hiding in the laws on the books. In every effort for reform, there is often a push for getting a new law passed. And yes, we do need new and better laws. But we also can’t wait. Time and time again, we find that laws on the books from years ago simply go unused, like the unused power to tackle noncompete covenants or Made-in-USA fraud. This is especially true when it comes to addressing the broken incentives of repeat offenders willing to pay fines but not fix their business model.

At the Consumer Financial Protection Bureau, we’re activating so many of these unused authorities. We’re taking actions using existing law to stop the spread of junk fees across banking products, and our work is on course to save Americans billions of dollars. The CFPB now serves as chair of the Appraisal Subcommittee, an obscure federal agency that can help fix both human and algorithmic bias in home appraisals.

Second, when it comes to curbing anticompetitive mergers, resilience matters and it’s not just the FTC and the DOJ on the hook. We’re seeing a renewed commitment to rigor and careful investigation by other agencies, like by the Department of Transportation when it comes to airline mergers.

Given the central role of banking and finance in our economy, I’m hoping the FDIC will put forward a series of fixes to the Bank Merger Act guidelines, particularly when it comes to how we consider resilience and risks to financial stability.

Third, anti-monopoly is not just about antitrust. Competition requires new thinking on trade, intellectual property, and especially banking and finance. We have to carefully look at how policies affect the structure of markets, especially in the digital world.

For example, at the CFPB, we will be proposing rules this year using a dormant authority to accelerate the shift in the U.S. to open banking, to make it easier for people to switch accounts and get the best deal using a set of common standards. This will help people earn more interest on their deposits, pay less interest on their loans, and protect their personal data. We’ve taken action to stop pay-to-play comparison shopping on mortgages. We’re developing new ways using other tools to increase competition for credit cards, where Americans pay tens of billions in interest and fees every year. We’re closely scrutinizing the role of Big Tech in our payments systems. Tools exist across government outside of antitrust and we need to put them to work.

Fourth, experience tells us that we’re better off when we have bright line rules, rather than complex regulation, watched by many and not just by a few. Complicated rules get exploited by those who can game them. Moving back to clear concepts, like caps and separations, will make violations easy to spot and easy to enforce. Ending loopholes and exceptions eliminates opportunities for exploitation. Our work to bring states and other jurisdictions together to take on widespread abuse is also much safer than relying on just one office or agency.

And finally, we must accept that there will be progress forward but also setbacks. Many agencies looking to protect the public face long odds on so many fronts. But there isn’t time to simply hope. It requires all of us to participate and to act and to stay determined. This will help to write a new history.

Thank you.