Hope is running thin for Mayor John DeStefano Jr. and critics of a deal that would sell off New Haven’s largest bank to Buffalo-based First Niagara.

In a decision released yesterday, the Federal Reserve Board approved First Niagara’s $1.5 billion acquisition of NewAlliance Bank, headquartered at Elm and Church Streets.

In January, DeStefano, along with Senator Richard Blumenthal LAW ’73 and Rep. Rosa DeLauro and other officials, denounced the deal in letters to regulatory officials as a potential disaster for New Haven residents because it would “reduce the credit available to low- and moderate-income individuals, small businesses and homebuyers, and cause significant job losses.”

The deal threatens the financial security of New Haven residents by taking decision-making about local lending out of New Haven, DeStefano said in January.

But the Federal Reserve Board found that the merger “would not have a significantly adverse effect on competition.”

The deal, already approved by both bank’s shareholders, still needs the approval of the Connecticut Banking Department and the Office of the Comptroller of the Currency.