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Rochdale Securities Chief Financial Analyst Dick Bove on the outlook for the financial sector.
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Economic crisis joining me now from Tampa Florida.
-- the health of the banking system.
And the health of our political system provides market master.
Dick -- -- chief financial analyst -- bill -- -- good to have you with this.
You know -- faith these banks haven't got a lot of supporters that it is just not real popular get out -- ago.
-- banks you're doing just that.
-- Well I think I think you can look at it from two perspectives number one.
If you take a look at that the raw numbers the American banking system isn't one of the strongest positions that it's been in in literally decades.
The capital as a percentage of assets of American banks today.
Is about is that the highest level it's been since 1934.
In other words it's never really been higher than it is today.
The liquidity in the banks is absolutely amazing.
You know people are really worried about banks in the stock market but people who deposit money a putting all of their money into the banks we saw today that.
You know people putting three billion dollars a week on a net basis He to JPMorgan Chase they put.
716.
Billion into the banking system so far this year.
There I mean.
Banks are -- are doing so much better than they were but hopefully.
There are a lot of wrong reasons.
Forrester to look at -- the reality of regulation here.
We're looking at god for we're looking at you know the it Durbin amendment we have got on now -- on the track.
You know the you know the idea that we're going to see trading suspended the Volcker Rule may go into effect.
I mean there it is He it's very popular right now in Washington.
Despite all of that it declarations by this president the democratic leadership.
And there are full till after the financial institutions in this country are.
He is they are and as a result there hurting.
You know the average if you will -- banking services whether it's -- -- so -- of the small business.
And and there are a number of ways to two point that out the first way is it the capital requirements on the banking industry because they're so high.
A preventing banks from lending money.
It in other words the government has come to the banks and says look first.
We want you to have more capital as a percentage of assets so the banks have to shrink their assets because they can't get the capital.
Then -- government says look you need to have more liquidity you've got to put.
More money into government bonds and cash the new -- so that reduces the amount of money available for lending.
Then third the government comes back and says look if you gonna make loans to small businesses.
We're gonna charge you higher capital rate than if you make loans to us the government so the banks have been given tremendous disincentive.
For lending money.
Disincentives they've even got conflicting.
Counsel and directives from the Treasury Secretary himself a week ago talking about He wants to see more lending.
This week of focusing on -- -- structural.
And systemic risk.
That at the very elemental -- This is bizarre regulatory leadership.
And supervision is.
-- -- taking Europe -- point of contradiction.
Did this a little bank -- it's not a little bank Comerica.
Which is headquartered in Dallas.
It's risk weighted assets -- a 102% of its assets.
Whereas Credit Suisse which is a Swiss bank has risk weighted assets -- 20% of its total assets.
What that means is that the bank that lends money to businesses.
In the United States is being charged a much higher capital requirement -- the bank which is involved in.
If you will speculative activity in Switzerland numbers are right and it's not fair debacles since it.
Morgan chase CEO Jaime diamonds point.
Some time ago.
I don't even a broader level.
We what are you what is your reaction to the Fitch downgrades.
UBS putting -- career veer you B of a and I I believe Moore Morgan Stanley.
And Goldman I mean.
Are you surprised.
Well that the basis of the downgrade doesn't make sense basically.
What what Moody's said when it downgraded the banks it downgraded was that.
The United States would not step up and support those banks if there was to be a crisis -- systemic about it I think that's the old downgrade this this is the new.
Yeah well but but I mean the point is that it downgrading banks that have.
Surplus cash -- -- -- cash flow is greater than the outflow and other with more cash is come in and then going out we'll take Morgan Stanley.
It has a 182 billion dollars in in liquidity.
It has 171000.
Salespeople who are skilled in raising deposits if they need to.
And it's a company which has an open checkbook with Mitsubishi UF -- so to downgrade that company simply makes no sense.
Given its access to funding.
If you take a look at UBS different story I mean there's a company.
Which is massively mismanaged.
And therefore you know is is -- high risk.
-- Broadway.
We thank you for being with us to bring our insight and perspective.
And a little.
Little touch of reality were to what is happening in American banking industry we appreciate the --
