Wells Fargo and Citigroup can now buy regional banks. Regulators gave permission. The same regulators who spent the last decade saying these banks were too big to exist have decided they should get bigger.
Five regional banks make sense as targets. The article lists them. Someone at those banks opened the news and learned their employer is now on a shopping list. They still have to show up Monday.
Wells Fargo famously opened millions of fake accounts for customers who didn't ask for them. The punishment for this was a growth restriction. The restriction has been lifted. The reward for systemic fraud is you get to acquire more customers. Makes perfect sense if you don't think about it.
Citigroup needed a government bailout so large during the financial crisis that taxpayers owned 36% of the company. Now they have regulatory approval to become more systemically important. The lesson here is if you fail hard enough you become unkillable.
Regional banks are nervous. Their executives are updating LinkedIn profiles. Their shareholders are wondering if they should feel excited or insulted. The answer is both. You're being acquired because your bank is valuable enough to buy but not strong enough to stay independent.
Retail traders will read this as a signal to buy regional bank stocks ahead of acquisition premiums. They will pick the wrong ones. They always do. The five banks listed in the article will trade sideways. The bank that gets bought will be one nobody mentioned.
The technical analysis says none of this matters. A megabank buying a smaller bank doesn't change the chart. It just creates a new ticker symbol for you to lose money on.
Regulators opened the door to megadeals. The door was closed because megadeals created the conditions for the 2008 crisis. We learned nothing except that if you wait long enough everyone forgets why the rule existed in the first place.
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