Bove Versus Bair
Although Federal Deposit Insurance Corp. Chairman Sheila Bair was hardly staking out controversial ground last week when she said in a Financial Times op-ed piece that banks should hold higher capital in the wake of the financial crisis, it still clearly angered Richard Bove.
Bove, an analyst with Rochdale Securities LLC, said the article demonstrated "clearly why the banking regulators are incapable of dealing with a financial crisis that they helped create."
In addition to blaming Bair for her agency's failures to prevent the crisis, he argues that forcing banks to hold more capital is killing the economy.
"The American banking industry now has more capital as a percent of assets than at any time since 1935," Bove wrote. The note won the attention of the New York Post, which wrote a story on it headlined, "Can't Bair to Listen — Analyst Bove Trashes FDIC Boss' Views, Abilities."
But another analyst, Christopher Whalen, managing director at Lord, Whalen LLC's Institutional Risk Analytics, said Bove was shooting the wrong messenger. "I think he is off base trying to blame a macro problem on the most conservative regulator," Whalen said in an interview. "Obviously Sheila has staked out higher capital and improved safety and soundness, which makes sense. This is her job."
But he agreed that raising capital now was a bad idea.
"The regulators are doing this at the wrong time; they should have done this five years ago," he said. "I think deflation is staring us all in the face, but don't beat up Sheila for that. You want to focus on [White House economic adviser] Larry Summers, [Treasury Secretary] Tim Geithner and [Federal Reserve Board Chairman] Ben Bernanke, because they don't get it."
In an interview Friday, Bove acknowledged his beef is with far more than just Bair. "She is only one of many," he said. "It's not fair to criticize her alone."
Geithner Under Fire
Here we go again. Calls for Geithner's resignation appeared to have died down recently, especially after he helped to pass the regulatory reform law, but there were new ones last week from House Minority Leader John Boehner and Rep. Tom Perriello, D-Va.
Then the Tea Party joined in, also demanding Geithner's head. "We support Congressman Perriello's sentiment, with the hope that by replacing our nation's chief economic policy makers we can begin the path to economic recovery," wrote Carole Thorpe, the group's chairman.
