Dick Bove Has PMS Meltdown About Cap Raise Requirements & Stress Test of Banks

Discussion in 'Wall St. News' started by ByLoSellHi, May 6, 2009.

  1. Dick may be right, though.

    Hey, here's a question for everyone who is interested in economics.

    They keep subjecting us to the term 'recovery.'

    What, precisely, will America look like fundamentally, and how will it be different, when we do reach the holy pinnacle of 'recovery' in this new world order?


    Forcing Banks to Add Capital May Delay Recovery, Bove Says
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    By Vincent Del Giudice

    May 6 (Bloomberg) --
    Forcing banks to boost capital in the midst of a recession will cripple lending and may delay a recovery, said Richard Bove, vice president and equity research analysts at Rochdale Securities in Lutz, Florida.

    “How are they going to assist the American economy if they are shrinking?” Bove said today in an interview on Bloomberg Radio. “If you make all those banks shrink, which is what you’re really doing by forcing them to add capital, how are they going to lend money?”

    Regulators determined Bank of America Corp. requires about $34 billion in new capital, the largest need among the 19 biggest banks subjected to government stress tests, according to a person with knowledge of the matter. Other institutions require capital as well.

    “If you go beyond these 19 banks to the next 20, which is what they are going to do, you’re going to knock some of those banks out of business,” Bove said.

    “By the time you finish, my guess is you will at least knock at least 150 banks out of business in the United States, shrinking the banking industry in the middle of a recession at a time when you want them to provide more lending to grow the economy,” Bove said. “It makes no sense at all.”

    To contact the reporters on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net.
    Last Updated: May 6, 2009 08:56 EDT