The news that BoA ponied up $33 million to settle charges (without denying or admitting any guilt) that it witheld bonus info on its Merrill Lynch acquisition sent well-known banking analyst Dick Bove into quite a rant today. His research report this morning on BoA was titled, "The Government Is Out of Control."
Bove argues that the government under the Obama administration is out to "punish" the American financial industry, but will also hasten its demise as the world leader in finance. Of the BoA/SEC deal, he writes, "The importance of this announcement is not that the SEC is suing Bank of America. The importance is that this is one of a number of thrusts being made at the banking industry by the government. The Administration has sent a number of proposals to Congress which, if passed, will harm the industry and curtail the activities of U.S. financial companies in the free markets. Other proposals have been entered which, if passed, will cripple the competitiveness of large banks forcing them to shrink."
Bove continues, "What is missing in this populist ire is any understanding of how badly the American financial system is shrinking versus the new powers in the Far East. At one point Austria‐Hungary, Spain, France, and Great Britain each were the world’s top financial power. These countries are not even thought of as being arbiters in the global system today."
"There seems to be no understanding that the United States is following these countries into the financial dust heap of history:
At one point the U.S. dollar was 100% of the world’s money supply. I estimate that today it is 19% of the money supply.
There are each more Euros and Yen than there are dollars.
There is more commercial paper activity in Europe than in the United States (based on 2007 numbers).
The biggest IPOs in the word are being done outside the United States and without the help of U.S companies in many
cases.
For every $1 held in reserves at the Federal Reserve in the United States, my estimate is that there is $6.45 in reserves at the Bank of China."