New financial-services regulations will be such a disaster for both banks and consumers that legislators will need to repeal them, according to Rochdale Securities’ banking analyst Dick Bove.
"The Congress has created legislation to solve problems that may not exist and has not created legislation to deal with real problems," Bove told CNBC.
Although the financial-services bill is still not in its final form, the proposed law calls for increased regulatory stringency over banks’ risk-taking and capital requirements.
Bove says that higher capital requirements will shrink the money supply, which in turn will trigger deflation, lower incomes, higher unemployment and a contracting economy.
"No one who is mandating higher capital in banks is considering this," he said. "In fact, the policymakers are united in their view that the global banking industry needs more capital," he told CNBC.
He also contends that price controls and increased regulation will force banks to charge fees for routine services, adding to consumers’ burdens.
"Millions of people will lose their bank accounts," Bove says. "The cost of banking will go up for everyone as the banks apply monthly maintenance fees to all of their customers.”
Senators have been discussing forcing bank holdings companies to boost their capital cushion, including keeping capital in forms more readily convertible to cash.
"It makes no sense that the capital and risk standards for our nation's largest financial institutions are more lenient than those that apply to smaller depository banks, when the failure of larger institutions is much more likely to have a broad economic impact,” Senator Susan Collins told the Epoch Times.
“Yet, that is currently the case.”
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