Tags: Bove | Volcker | rule | harmful

Bove: Volcker Rule Crimps Markets, Hurts Investors

By    |   Wednesday, 02 Apr 2014 06:02 PM

Renowned bank analyst Dick Bove of Rafferty Capital Markets asserts that the Volcker rule, which limits banks' proprietary trading and their activity in hedge funds and private equity funds, is bad not only for banks for markets and investors.

"The Volcker rule is extraordinarily harmful," Bove told "America's Forum" on Newsmax TV. 

"It removes liquidity from the market place. And if it removes liquidity from the market place, ultimately it forces the person who's buying or selling stock to pay slightly higher or to get slightly less."

Watch our exclusive video. Article continues below.



The Volcker rule also restricts investment in companies funded by venture capital, Bove said.

"If you really want money for venture capital companies at this point in time, you go to China for it, because that's where there's a lot of access funding and because Goldman Sachs, Morgan Stanley, JPMorgan etc., are not allowed to make investments in these firms."

Editor's Note: 18.79% Annual Returns ... for Life?

Say you have a biotechnology company developing a new drug. "Traditionally you would have a lot of brokerage firms putting money into the creation of that drug," Bove said. "They can't do it anymore. They're limited to 3 percent of their capital." So the Volker rule is "impacting the ability of small corporations to bring innovative products to market," he said.

The idea behind the Volcker rule was to prevent banks from speculating with depositors' money, and it's possible to audit banks to make sure that doesn't happen, Bove said.

"But we've gone way beyond that. We've gone to the point of saying you can't use any money that you've raised in the open markets, whether from depositors or from other investors, in proprietary trading. That is excessive, and that hurts the market."

For average investors, this may hurt them when they're buying or selling a small stock, Bove said.

"If you're taking liquidity out of the marketplace, that's not going to happen for Microsoft or IBM, or maybe even Facebook or Twitter," he said. "But there are thousands of companies that have stocks in the market. If you don't allow the brokerage firms to have proprietary positions in hundreds of companies, when the average investor says, I want to sell my shares in x, y, z, he's going to get less than he would if the market was more liquid."

And investors buying stocks will pay more, Bove said. "It is going to affect the trading in smaller companies with smaller flows. The bottom line is people will pay more for what they buy and they will get less for what they sell."

Editor's Note: 18.79% Annual Returns ... for Life?

Related Articles:

© 2017 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
StreetTalk
The Volcker rule, which limits banks' proprietary trading and their activity in hedge funds and private equity funds, is "extraordinarily harmful," renowned bank analyst Dick Bove of Rafferty Capital Markets told "America's Forum" on Newsmax TV.
Bove,Volcker,rule,harmful
501
2014-02-02
Wednesday, 02 Apr 2014 06:02 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved