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Rochdale Securities’ Dick Bove argues it is not necessary to require banks to have “living wills.”
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-- across the board let's -- the financial -- nine of the biggest banks are crafting these living wills.
And outlined at each bank's plan if it fails to deadlines and plans to regulators is on Monday.
And we've got a banking yeah.
Living will we'll create more problems than they solve Dick -- -- of -- up -- joining us now Dick elevate thank you so much for joining us.
Thank you senator so personal what -- own living will for a bank we know it is for a person what are the banks have to submit here.
-- oil basically -- requirement that the bank explain just exactly how it would take itself apart he who was about to fail.
And Martin Groenenberg who's the acting director of the FDIC.
Has also put in place a whole a series of steps that would be taken.
You know to take at a bank apart again if who was believe that that bank you couldn't avoid failure but -- -- isn't this sort of normal course we've been through a lot of -- -- failures in the past the FTC has a procedure.
They sort of divvy up the assets of the bank's other banks when it goes down -- so why do we need a living well.
Well we definitely do not I mean first -- by having a living will where admitting.
We don't think that the regulatory system which costs the taxpayer tens of millions of dollars and has all of these different.
Parts do with the federal yeah FDIC.
BO CCETC.
Was saying that it won't work that it isn't good enough to prevent these banks.
From going to a failure status all right so we've admitted that that won't work so now we're saying how do we take them apart.
And if the banks you know give specific information -- We're gonna sell the money market division we're gonna close down.
Our data processing operations we're gonna get rid of our factoring business you know it's that are what what they're doing is they're telling the people who work for that bank.
-- jobs and it -- you the first to go.
Why would you tell people that I mean why would people who aren't you know feel pretty good about their capabilities.
Want to -- with that part so it's useless is going to be cut off.
These living well yeah let's.
I think they're useless I think that the FDIC has done.
Actually a phenomenally good job over the past seven decades in terms of dismembering banks where banks had to be taken apart.
-- I don't see the necessity of establishing a living will.
-- telling all of these different people and all these different divisions that -- not critical to the to the success of the bank.
Subject -- where do you stand on the banks right now not only do you see this these living wills as useless -- you think they can do harm to the banks and in -- And the wake of the recent Moody's downgrades of the big financial institutions.
Where do you stand on the banks right now as an investment.
Well you know I'm one of these old bulls who Q who keep banging -- the door.
I think bank stocks -- so cheap it is it is beyond belief I think that.
In the last eleven quarters you -- -- bank earnings go up.
Each each quarter right year over year.
In the in the first quarter of this year they were up 22% over the prior year they were up 40% over the prior quarter.
If you look at the balance sheets of the banks -- an hour and a better position than we've seen in.
I would argue thirty to forty years.
They have more capital as a percentage of assets it that in any time.
Going back to 1938.
They have -- staggering amount of cash on their balance sheets.
You know they've been a loan to deposit ratios -- eighteen a year of good levels the funding of the of the assets of the banks.
-- 4% of the funding is coming from deposits and equity the American banking system is -- phenomenally good condition.
The V the risk in the American -- stocks is due to the fact that we've got people who are afraid that we're gonna go back into recession which would definitely earned him.
And so you have fears about European contagion which I think was taken off was taken off the table this morning.
OK Dick got to ask you about one of the bank in particular JPMorgan -- bad trade.
Estimates now up to nine billion dollars that they -- and I will bet which worries you more the actual bad debt that JPMorgan made.
Or congress and regulators reaction to it.
Bush I hate to tell you -- but I think both are gonna blow away of the ancient history and a couple of weeks I think that.
You know if in fact the losses nine billion then in the second quarter JPMorgan will lose.
63 cents a share but for the full year 2012 JPMorgan will make three bucks.
JPMorgan should make something on the Europe five dollars and 31 cents next here.
Which is 22 billion dollars while 22 billion dollars as -- money than any other bank in the world will make.
It's more money than any company in the United States will make except for five.
So so the net effect is JPMorgan is this cash profit generating machine that screwed up beyond belief.
In terms of this trading glitch but to to assume that it's gonna it detracted derail.
The earnings are the bank I think is a mistake plus.
Congress had to make a lot of noise.
About what happened because you know he was too blatant it was too much out there so congress is the right thing right taking this -- down and and and spanking them.
But I I don't think they're gonna do anything meaningful in terms of a new legislation -- to -- banking activity.
Is -- a screaming buy by the way JPMorgan.
Oh I think so I think that you know to assume if if I'm anywhere close of being correct that this company period five dollars and thirty cents next year.
It's selling at about six and a half times earnings it's it's the most -- -- bank that generates as they said more money than any other bank in the world.
Selling at six and a half times yeah.
Its dividend went up 20% this year -- go -- certainly another 20% next year it's it's it's an unbelievably cheap stark.
Dick -- a great to see -- -- have a good weekend at a great July 4.
