WASHINGTON -- Federal Reserve Board Chairman Alan Greenspan said yesterday that the recent wave of industrial and financial-services mergers isn't likely to decrease competition. Still, mergers could create corporate bureaucracies so large that shareholders' returns are hurt, he said.
Bank mergers "have led to a substantial rise in national concentration measures [but] they have little or no evident impact on average concentration measured at the more relevant local market level."
Greenspan and top Clinton administration antitrust officials gave at times contrasting views on the merger wave at a hearing before the Senate Judiciary Committee. Greenspan suggested that the government might be too aggressive in enforcing antitrust laws governing mergers and anti-competitive conduct.
"We do not have and cannot have the resources required to fully understand the implications of mergers," Greenspan said. Forecasting how markets or technologies will evolve is an "excruciatingly difficult task. We sometimes do it reasonably well and sometimes we do it poorly."
Janet Yellen, chairwoman of President Clinton's Council of Economic Advisers, supported Greenspan's view. "The evidence we have does not suggest any alarming trend toward economic activity being concentrated in large firms," she said. "Moreover, large size is not the same as monopoly power."
Greenspan and Yellen said the consolidation of banks isn't reducing competition because local markets aren't affected by the changes in ownership.
Although mergers don't necessarily hurt competition, Greenspan said, "it appears that bigness should be primarily the concern of shareholders whose returns could be muted by large company inefficiencies."
Fed officials have studied bank mergers since 1990 and have found that four of the nine have increased efficiency, he said, "meaning they have actually improved the quality of the product."
Joel Klein, the top antitrust enforcer of the Justice Department, agreed that most mergers help the U.S. economy. But he disagreed that the government should let a merger go through to determine whether it hurts competition. Greenspan questioned the ability of antitrust enforcers to predict how a combination of two companies would affect an industry.
Pub Date: 6/17/98