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Tags: dick bove | banks | socialism | nationalize

Dick Bove: US Banks Have Been 'Nationalized'

Dick Bove: US Banks Have Been 'Nationalized'
(Dollar Photo Club)

By    |   Tuesday, 13 October 2015 07:08 AM EDT

Dick Bove, star bank analyst at Rafferty Capital Markets, said he sees U.S. banks “well on the road to socialism.”

The Rafferty Capital Markets' vice president of equity research told CNBC that this is all due to a transportation bill in Congress. The bipartisan Senate bill, announced in July, would cut the dividend paid by the Federal Reserve to banks each year from 6 percent to 1.5 percent, and the difference would go toward funding highway projects

"The government has taken the position that, because they offer FDIC insurance, they have the right to invade banks,"

"Unfortunately, I believe the banks have been nationalized; I believe we're well on the road to socialism in terms of the way we're taking money flows out of the banking system and putting it into highways," he said.

Lawmakers said the bill could provide three years of funding for the nation's crumbling highways, bridges and rail systems.

"They are not only setting very tough regulations concerning how the banks function, but with the highway safety bill, what they're doing is saying 'we're going to take some of the revenues from the banks and use it to repair highways,'" Bove said.

Wall Street is desperately trying to persuade U.S. House lawmakers to kill the proposal that would use money from banks to fix the nation’s highways, Bloomberg reported. A key concern is that once Congress taps the finance industry to help fund infrastructure projects, it won’t be able to stop.

At stake is an annual dividend of 6 percent the banks receive from the Federal Reserve, which totals less than $350 million apiece for JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. The Senate wants to cut the dividend and use the money to help pay for a highway funding bill.

The threat of losing it became more serious when Senate Majority Leader Mitch McConnell told bank executives at a private meeting in Washington that there was no way he would remove the provision that reduces the dividend to 1.5 percent for banks with more than $1 billion of assets. House members now have to decide by month’s end whether to back the Senate’s approach before highway funding expires.

Even though it’s a fraction of the banks’ bottom line, the dividend cut has consumed lobbyists since July because it’s one of the few proposals that could hurt big banks and has the potential to become law in the current Congress. Lobbyists have held dozens of meetings with House staff and are evaluating whether to bring a lawsuit if it becomes law.

They want to avoid setting a precedent they say would let financial firms become a piggy bank for future government spending and potentially pave the way for a tax on banks.

Their efforts may prove futile with lawmakers realizing the dividend cut could result in $17 billion in extra money for the federal government over the next 10 years, according to Congressional Budget Office estimates.

“The industry is in a very dangerous spot because it is a pot of gold,” Karen Shaw Petrou, managing partner of Washington-based research firm Federal Financial Analytics, told Bloomberg. “With the general political climate I don’t know a lot of people on Capitol Hill that like banks.”

Spokesmen for JPMorgan, Bank of America, Citigroup and Wells Fargo declined to comment on the dividend cut.

During the last few months, lobbyists have met with staff for House Financial Services Committee members because they oversee the banking industry, including Chairman Jeb Hensarling, a Texas Republican, Representative Bill Huizenga, a Michigan Republican, and Carolyn Maloney, a New York Democrat, according to people familiar with the discussions.

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Economy
Dick Bove, star bank analyst at Rafferty Capital Markets, said he sees U.S. banks "well on the road to socialism."
dick bove, banks, socialism, nationalize
629
2015-08-13
Tuesday, 13 October 2015 07:08 AM
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