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Capital One Financial

(COF) - Get Capital One Financial Corporation Report

began making its public case for

Federal Reserve

approval of its agreement to acquire ING Direct

ING Groep

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The Fed is holding the first of three public hearings on the McLean, Va., lender's June agreement to acquire INGDirect for roughly $9 billion. 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 the merger. The Fed agreed on Aug.26 to extend the comment period until Oct. 12, following three public hearings.

The first public meeting began this morning at the Renaissance Hotel in Washington D.C., with a packed agenda scheduled to end with an open mic at 5:40.

Following opening comments by Federal Reserve officials, John Finneran, Capital One's general counsel and corporate secretary said that Capital One's agreement to acquire ING Direct "satisfies all of the financial, managerial, competitive, public benefits and other factors the Board must consider under the Bank Holding Company Act," adding that "Capital One's strong capital position and prudent risk management has enabled it to emerge from the Great Recession as one of the strongest financial institutions in the country."

Finneran took pains to stress that neither Capital One nor ING Direct had "engaged in the kinds of activities that precipitated the financial crisis, including the structuring or sale of mortgage-backed securities, collateralized debt obligations, credit default swaps or other exotic instruments," and that the combined bank wouldn't have any of the complexity or interconnectivity that the Dodd-Frank Act sought to address in ending the concept of 'too big to fail.'"

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Addressing the concerns that the merger might not be in the best interests of the communities the combined bank would serve, Finnerman said that Capital One's "roven ability to generate prudent loan growth," would lead to "a vastly superior deployment of ING Direct's deposits from a customer, prudential and economic perspective." ING Direct's business model of gathering deposits solely through the Internet limits its ability "to use its deposits to offer the kind of credit needed to help strengthen the U.S. economy," according to Finnerman.

Capital One's general counsel went on to say that the merger would "serve as a catalyst for community development, local job creation, and economic growth," and that "at a time when many financial institutions are announcing sizable reductions in employees," Capital One anticipated "adding thousands of new jobs this year as we expand our business."

Dorothy Broadman, Capital One's head of community development banking and the officer in charge of the company's compliance with the Community Reinvestment Act, said that Capital One had a strong track record of being "locally engaged and responsive" after previous acquisitions.

Broadman said that Capital One had aggressively expanded its "branches in low- and moderate-income areas after the previous bank acquisitions," opening 33 branches in LMI areas despite a very challenging economic environment," and that "as an example, though our Houston branch market share was only 4%, our 8 branches represented two-thirds of the total new LMI branches for all banks."

Both Finnerman and Broadman said that Capital One was committed to "making a $180 billion community investment commitment over the next ten years."

Christopher Cole, senior vice president and senior regulatory counsel for the Independent Community Bankers of America, also testified, calling for "a moratorium for all mergers and acquisitions

involving banks with total assets over $100 billion, until the regulagtory interpretation of

the Dodd-Frank Wall Street Reform and Consumer Protection Act is comopleted and

systemically important financial institutions' capital plans and contingent resolution plans are submitted."

Systemically important financial institutions, or SIFI, are subject to capital surcharges of up to 2.5% under the enhanced Basel III capital guidelines, which the Federal Reserve is expect to rule on later this year.

Cole said "let's give it at least a two-year moratorium

on large-bank merger deals until all the Dodd-Frank rulemaking is completed."


Written by Philip van Doorn in Jupiter, Fla.

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Philip van Doorn


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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.