The federal government’s bank policies, designed to rein in risk in the wake of the financial crisis, may help send the economy back into recession instead, says star bank analyst Richard Bove of Rochdale Securities.

The government’s attempt to break up the country’s biggest banks is a problem, Bove says.

"At one point the four largest banks in the United States had 50 percent of the assets of the banking industry," he tells CNBC. But now Washington is forcing banks to increase capital, which is forcing them to reduce assets.

Dick Bove (Rochdale file photo)

"The government doesn't want those banks to exist in that fashion any longer. It wants to see a spreading of the risks across the banking industry. The fact of the matter is it doesn't seem to care what it's doing to the economy."

In essence, the government is removing liquidity from the financial system, penalizing banks that lend aggressively, which is what makes the economy grow, Bove says. Washington’s strategy is a sure-fire path to recession, he says.

The banking sector itself certainly seems close to recession. UBS, Goldman Sachs, Bank of America, and Credit Suisse all have announced major layoffs in recent weeks.

CLSA analyst Mike May predicts that revenue growth for U.S. banks will come in at the lowest level this year since 1938, The Wall Street Journal reports.