Will the government allow the Capital One-ING Direct merger to proceed? That's the question du jour, as the first of three Federal Reserve Board meetings got underway.

The big issue on the surface is too-big-to-fail. Some have suggested that the merger, which would create the fifth largest domestic consumer bank by deposits, would essentially create another too-big-to-fail bank at a time when the government is hardly capable of another buyout.  In theory, the living wills that the top banks are now drawing up at the FDIC's request should provide a route toward winding down such institutions without government aid. But there's a lot questions about whether these wills could possibly work in a full-blown financial crisis, like the one in 2008-2009, which pushed several banks near the point of failure.

Most likely, they would not. Capital One has taken pains to underscore the fact that it did not take part in the risky mortgage-backed structured products activity that proved to be the downfall of several banks. We can only hope they remain as conservative in the future. I'm not sure what kind of legal reassurances they can offer in this regard. The bank has also pledged to invest $180 billion over ten years in low- and moderate-income areas in order to win support from various community activists. My sense is that at the end of the three hearings, the deal will be allowed to go through, albeit with some token concessions.

For more:
- here's an article from TheStreet.com

Related articles:
Fed to hold hearings on Capital One deal for ING  
Capital One battles consumer skepticism   
Capital One to buy ING Direct, join top ranks of banks