Tags: Bove | Banks | JPMorgan | loss

Dick Bove: No Reason to Break Up Banks Over JPMorgan Fiasco

Tuesday, 15 May 2012 08:23 AM

Regulators shouldn't rush to break up big banks over the $2 billion trading loss at JPMorgan Chase, says Dick Bove, a banking analyst at Rochdale Securities.

Despite the massive loss, the result of a botched hedging strategy, JPMorgan Chase remains an overall healthy institution and the system largely unthreatened.

"I don’t think there’s any reason to break up the big banks," Bove tells CNBC’s "The Kudlow Report."

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

"Particularly if a bank can earn $18 billion a year and $22 billion the next year, why in heaven’s name would you say it can’t be run?"

Not only are earnings healthy, the bank's balance sheet points to long-term health.

"It has $2.3 trillion worth of assets. It has $1.1 trillion worth of deposits," Bove says.

"That means there’s $1.2 trillion of wholesale-funded assets, which are used to do this trading. There are no taxpayer dollars involved."

Bove also points out the hedge in question didn't involve the bank's funds guaranteed by the Federal Deposit Insurance Corporation, which taxpayers shouldn't fret about covering the loss themselves.

"There's absolutely no reason in the world that you would have to dip into retail deposits to fund what you’re doing in trading. It makes no sense," Bove says.

"And it’s against the way a bank is constructed. They don’t use retail deposits to fund the security portfolio. That’s done with borrowed money, and it’s done with capital, or equity. They did not use taxpayer money — or deposits, or retail deposits, or whatever you want to call it — to fund these transactions."

The White House has said the trading loss reflects the need for more regulations on Wall Street banks called for by the Dodd-Frank reform bill.

"This event even only reinforces why it was so important to pass Wall Street reform, why it is so important to fully implement Wall Street reform," says Presidential Spokesman Jay Carney, according to the AFP newswire.

"Ever since it passed, there's been millions and millions of dollars spent by Wall Street lobbyists to try to water down, delay, and render ineffective those rules."

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

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Tuesday, 15 May 2012 08:23 AM
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