Wall Street analyst Dick Bove pushed back hard against "break-up-the-big-banks" advocates like Dallas Fed President Richard Fisher and FDIC vice chairman Thomas Hoenig, and his views, in turn, generated some heat from detractors.
In his latest broadside against efforts to split up the nation's largest financial institutions, Bove said the dollar is at risk of losing its standing as the world's reserve currency. That would mean foreign creditors could demand that the nation pay its more than $15 trillion of outstanding public debt immediately.
Conversely, growing the banking system and unleashing big institutions "to use the tools they have developed" will protect American financial interests globally.
"In doing so, the biggest American banks will aid the growth of the American economy and protect American prosperity," said Bove, the vice president of equity research at Rochdale Securities. "The problem is the United States does not want this. It is shrinking its big banks.
"It is using every political technique it can muster to reduce their profits and profitability. It is on a vendetta to curtail banking activity."
Bove also contends that big banks are necessary to ensure the "global currency supremacy" of the U.S. dollar. That supremacy, Bove asserts, is necessary to avoid "riots in the streets."
"The biggest benefits that the United States gains from having the global reserve currency is that this nation has never really had to concern itself with its budget or trade deficits," Bove said. "Unlike other countries that overspend and then must develop systems to pay back what they borrowed, the United States has never had to worry about this problem. It simply prints money and uses the printed money to pay its bills. No other nation in the world is allowed to do this."
But if the U.S. banks continue to fall behind their global competitors the dollar's standing as the global currency could suffer, hampering the ability to print more dollars to fund debt. Bove envisions riots on par with those in Greece if the U.S. is forced into austerity measures because it cannot keep printing money to pay its debts.
In other words, in order to avoid the inevitable results of our profligate deficit spending binge from occurring until all of us presently alive are dead, and future generations are then hosed, the big banks must become large enough to absorb not only smaller banks but even the Sun's rays, and become black holes of need and greed that chew up everything of value and in turn spit out US dollars into the world like manna from heaven. I get it. That sounds like a plan for a society whose motto might be a line spoken by Abraham Lincoln's character in the movie Bill and Ted's Excellent Adventure: "Be excellent to each other, and party on dudes!"
Commenters to the linked article, written by Jeff Cox and posted on CNBC's "NetNet With John Carney's" web site, took issue with Mr. Bove. A sampling:
---what an a$$ hat
---Isn't this the same clown who upgraded Lehman, days before their bankrupcy, screaming, "BUY BUY BUY!!!!" ??
What an assclown.---break them up, blow them up, and @#$% them up
Ah, calm and reasoned discourse carries the day again, I see.
Regardless of what you think of Bove's position, I like the fact that he's raising the issue. With so much of our recent banking policy, including the bailout programs and Dodd-Frank, having been quickly implemented and, in the case of Dodd-Frank, shoved down the throats of its opponents, taking the time to think through radical change BEFORE it's implemented might be worth a try, notwithstanding the fact that such a modus operandi flies in the face of the Pelosian Theorem ("You have to pass the bill before you can know what's in it!"). Contrary voices raising an intelligent argument ought to at least make us stop and carefully think through the consequences of radical change before we make it. That would be a refreshing change of pace, wouldn't it?
And as fond as I am of the term "a$$hat," I don't think it advances that agenda.
