Barney Frank, Fed Put Brakes on Capital One Deal

NEW YORK (TheStreet) -- For Capital One (COF) shareholders, the stakes couldn't be higher.

After an outcry from consumer groups, Rep. Barney Frank (D., Mass.), the senior Democrat on the House Financial Services Committee, requested that the Federal Reserve extend the public comment period preceding approval of Capital One's deal to acquire ING Direct from ING Groep (ING).

The Fed on Friday announced that the comment period would be extended until Oct. 12 and include public hearings.

For Capital One's shareholders, this could be a brutal 47 days as the company has alreadypriced a $2 billion offering of common shares at $50 a share, to partially finance the $9 billion ING Direct acquisition. The common offering will close only if the ING deal is completed.

Capital One's subsequent deal to pay a premium of $2.6 billion to acquire HSBC's(HBC) $30 billion U.S. credit card portfolio is expected to be completed in the second quarter of 2012, and will rely heavily on Capital One's increased liquidity from the ING Direct deal, which was originally expected to be completed in late 2011 or early 2012.

In asking for the Federal Reserve to extend its comment period before deciding whether to approve the Capital One acquisition of ING Direct, Frank was concerned that "this proposed purchase would create the fifth-largest bank in the United States," Reuters reported.

The Federal Reserve has scheduled public meetings on Capital One's ING Direct deal, including a meeting in Washington, D.C. on Sept. 20 at a location to be determined, followed by a Sept. 27 meeting at the Federal Reserve Bank of Chicago and an Oct. 5 meeting at the Federal Reserve Bank of San Francisco.

The Fed said the purpose of the meetings was to help the regulator "determine whether the acquisition can be expected to produce benefits to the public" that will "outweigh possible adverse effects," which include "decreased or unfair competition, conflicts of interest, unsound banking practices and risks to the U.S. banking or financial system."

The Fed also said it would review Capital One's "financial and managerial resources" and the performance of Capital One and ING Direct "under the Community Reinvestment Act."

The regulator didn't say whether the concerns of Capital One's shareholders would play any role in its evaluation of the merger agreement.