WASHINGTON (Reuters) – Morgan Stanley’s takeover of brokerage E*Trade Financial Corp reflects a more relaxed regulatory mood in Washington, but it is still a gamble in an election year that will see Democrats continue to shine a spotlight on Wall Street excesses, said analysts.
The bank’s CEO James Gorman said on Thursday he expected the $13 billion all stock deal, the largest by a Wall Street giant since the 2007-2009 financial crisis, to be completed by the fourth quarter with little regulatory pushback.
His confidence underscores a seismic shift in Washington, where a more industry-friendly tone from President Donald Trump’s regulators has helped unleash other bumper deals in the financial sector.
In November, Charles Schwab Corp said it was buying rival TD Ameritrade, in a $26 billion blockbuster deal. That announcement came just days after federal bank regulators approved the $28 billion merger of BB&T Corp and SunTrust into a new firm called Truist Financial Corp in just nine months.
But such a bold move by Morgan Stanley, one of the riskiest banks in the United States with roughly $900 billion in assets, will test regulators’ limits during an election year in which Democratic primary candidates are burnishing their bank-bashing credentials.
The deal would have to get the green light from the Federal Reserve, and potentially other financial watchdogs. Progressive Democrats say mega-banks put the financial system and consumers at risk, and have called for big lenders to be broken up.
“This is not going to be an easy deal to move through the Federal Reserve. Morgan Stanley is a globally significant financial institution, which means any sizable deal is subject to strict review,” said Jaret Seiberg of Cowen Washington Research Group in a note on Thursday.