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) -- The

Federal Reserve's

coming hearings on

Capital One's


deal for ING Direct is "headline risk only," according to MF Global analyst Jaret Seiberg.

While the regulator's announcement after Friday's market close that it would hold public hearings on the agreement by Capital One to purchase ING Direct from

ING Groep


may have given investors pause, it would seem investors remain confident of the deal's eventual approval, leading to the MacLean, Va., lender's subsequent purchase of



U.S. credit card portfolio, as Capital One's shares rose 3% Monday, to close at $45.39.

Capital One's deal for ING Direct -- which had $82 billion in deposits as of June 30, gathered through its internet operations -- is the first large U.S. bank merger in the new regulatory environment following President Obama's signing of the Dodd-Frank Wall Street Reform and Consumer Protection Act in July of last year.

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The Federal Reserve has to address Dodd-Frank's notion of "too big to fail," since the deal will vault the combined Captial One to be the fifth-largest U.S. bank by deposit size. That issue was cited by Representative Barney Frank (D-Mass.) in his request for the Federal Reserve to extend its public comment period prior to approving the deal.

Commenting on the Fed's required "systemic risk test," Seiberg says that MF Global's Washington, D.C., research group sees "no scenario in which the Federal Reserve sees this deal as raising a systemic risk because if this poses a systemic risk than it would have to order the breakup of all the mega banks.

Seiberg also dismisses the notion that the Federal Reserve will deny approval of the Capital One/ING Direct deal on deposit concentration limits, and Capital One has said that following the ING acquisition, the combined company will "remain a traditional bank with only 1.5 percent of deposits nationwide."

Addressing Frank's suggestion that "care should be taken" to examine the companies "compliance with the Community Reinvestment Act" and the desire of consumer advocates, including the National Community Reinvestment Coalition, for "a clear commitment from the bank of its intentions to serve working class Americans," Seiberg says that "for regulators to stop a deal on CRA grounds, the banks must have failing CRA grades. That is not the case with this deal. That means this option is off the table."

The analyst says that the Federal Reserve has held similar public hearings before previous large mergers, including the



merger with Travelers, the

Bank of America


acquisition of NationsBank and

Wells Fargo


acquisition of Norwest -- all of which took place in 1998 -- "to give activists a chance to raise every possible objection to the deal."

Seiberg adds that during the last wave of large bank mergers, the banks "responded to Fed hearings by striking deals with community activists for commitments to generate loans and open offices in lower income areas," which were steps the banks were likely to take anyhow.

Pointing to a likely positive outcome of the hearings for all parties, Seiberg says the media attention "benefits the activists," and that "the smarter banks historically have turned the hearings to their advantage by cutting CRA agreements with activists and turning what should be negative publicity into good publicity."


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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.