You're watching...
Rochdale Securities’ Dick Bove on the potential for the Federal Reserve to take further action to boost the economy and the impact of J.P. Morgan’...
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Being fed Bernanke underwhelmed Wall Street today but the Fed Chairman did get a clean bill of health to the country's banking system that's something.
Was inaccurate diagnosis joining me now Dick broad base sale securities one -- -- top bank analysts in the country Dick thank you so much for joining us appreciate it.
Thank you -- so big picture here because one of the main headlines of course that came out of what Ben Bernanke had to say today was that people felt like.
He wasn't indicating that he's gonna turn on the printing presses as much as may -- other fed governors had said yesterday -- he had said the past.
What -- your interpretation of what he -- Well my my interpretation was that he he wanted to tamp down expectations of turning on the disfigured but that he is actually gonna.
Be forced to do so because basically if you've got.
Three fed -- publicly stating that they think.
That's a more stimulus is required and it's very hard for the Fed Chairman to take a position that would be in opposition to what they say.
The -- the fact of the matter is however he should not turn on the spigot.
Because there's no indication that QE1 are QE2 did anything to really assist the economy.
I mean a lot of people make the kids and -- that's pretty bleak a lot of people make the case that QE1 at least kept the banking system from seizing up that we needed initially.
But over this long period of time you know we haven't seen in the economy get better all we've seen its interest rates get low and stay low.
And that sort of helpful -- beyond that there isn't much that has happened do you agree with that.
-- I think I think it's pretty clear that if you take a look at where the money went because the money didn't just evaporate go away.
It went in a kind of a big circle out of the Fed right back to the Fed.
And and the Fed use it to buy government bonds so what effectively happened was the Federal Reserve printed money.
In use that money to buy government bonds so right now the assets of the Federal Reserve are roughly 92%.
-- government bonds which is.
Somewhat higher than it usually is.
Citi think there's a danger they try to do markets a lot of people think that the meeting comes -- the end of the month -- they're gonna do some new form of Operation Twist perhaps something outside.
It will it just do nothing -- -- -- negative impact.
Well you know most money.
Tourists -- believes that you know you cannot stimulate the economy by printing money and and basically Milton Friedman believes that and as they say most monitoring this.
Would agree with that and I think if we looked at the period.
From 1960981982.
You know we had four recessions and that period.
And we had Arthur Burns in G William Miller.
As the Fed Chairman and they kept printing money like crazy but it didn't do anything even Paul Volcker when he tamp down the economy didn't stop printing money.
In the printing of the money just increased inflation it did not increase economic activity.
So theorists would say it doesn't work.
You know the laboratory experiment that we had from 1969.
To 1982 says it doesn't work so I'm not sure it's gonna work this time around either.
Let me turn -- to JPMorgan now because we're gonna have Barney Frank coming up in a short time in.
And ask him about his chance to grill Jamie -- down the road of course mr.
-- is going to be appearing before senate committee next week.
First of all where do you think that situation stands right now with their multi billion dollar loss.
How serious do you think it -- and and what's -- look ahead to -- to be hearing next week.
Well coming let let's start with you know a couple of simple statistics JPMorgan.
In 2011.
Made more money than any other bank in the world okay.
JPMorgan if you took a look at -- relative to all of the other corporations in the United States.
There's only five companies in the United States have made more money than JPMorgan.
So you know I heard this a focused today say.
That it's it's too big to be managed so I'm just wondering if the company makes eighteen billion dollars how much money does it have to make.
For it to be considered to be the right size to be managed.
JPMorgan will make more money this year than have made last year even with the total screw up and it was a total screw up for which Jamie Dimon is to blame.
OK even with that total screw up it'll make more money this year that it made last year and will make a lot more money.
In 2013.
And it made in 2012.
So JPMorgan.
Is not in trouble JPMorgan is one of the best managed companies in the United States.
But you know a lot of people -- that this loss could get a lot bigger than what.
You know people originally thought that it could grow to five billion dollars or even bigger that it's a trade that hasn't been unwound yet.
Mean is -- -- size that would make you change your opinion it's hard to get more nervous.
Well and I think they're gonna lose for a quarter billion that's my estimate -- don't ask me why that's a very so precisely -- quarter billion.
But I think that's what we're looking at and I think that.
You know JPMorgan is not going to be able to unwind this trade until 2014.
Or 2017.
Because there -- two phases in the particularly derivatives that they've invested in so so the fact of the matter is that it is a problem.
He was handled improperly.
You know in my view it did represent proprietary trading on the part of the bank.
And therefore it was against let's say this spirit of the vocal rule.
So I think congress will go after the company on that basis.
But you know -- the fact of the matter is that JPMorgan hires over a quarter of million people in the United States.
It's been adding branches and jobs in the United States.
It has one point one trillion dollars in deposits 700 billion dollars in loans in the United States.
So the net effect is it's it's a significant assist.
To the United States economy I would argue that JPMorgan bailed out the United States taxpayer three times in the last four years.
One that they bought -- -- -- nobody else would buy it.
Two they bought Washington Mutual and nobody else could buy it.
And three they -- -- they took the TARP money which they didn't want.
And they paid it back with a huge profit.
To the US taxpayer so I don't know why there is this need.
To attack this company which does so much for this company is this country and so much for this country's economy.
-- -- -- Thanks so much for coming -- we appreciate it.
