Big banks aren’t raking in the piles of cash they were a decade ago because of today’s suffocating government regulations and Federal Reserve controls, banking analyst Dick Bove said.
"The dictatorship of the Fed on the regulatory side has basically taken away capitalism," Bove told CNBC. "The Fed makes the decision of what the cost of money should be. It makes the decision of what the quantity of money should be," he said.
"It'll take until 2019 for Wells Fargo to make as much money as it made in 2009," the Rafferty Capital analyst said.
"Goldman Sachs hasn't come close to what it earned 10 years ago," he continued. Morgan Stanley also had a much bigger year about 10 years ago than it had at the present time."
He said banks are sitting on "staggering amounts" of money they can't lend "because presumably the borrowers don't want it."
The regulations put in place by the Dodd-Frank Wall Street Reform Act have caused the velocity of money in the U.S. to decline, Bove said, a trend he sees as hurting the U.S. economy and resulting in "tens of thousand" job cuts and branch closures in the financial sector, CNBC.com explained.
"The banks have been forced to siphon staggering amounts of money in the coffers of the U.S. government, directly and through the Federal Reserve, as a result of all these regulations being thrown at them," he added.
Federal Reserve Chair Janet Yellen recently was pushed into the election-year boxing ring during a congressional committee hearing, defending the central bank's regulatory role, taking and landing punches on Wells Fargo and other banks considered too big to fail, and addressing accusations of political conflicts of interest.
At a House of Representatives Financial Services Committee hearing, Yellen also provided details on the changes the central bank is considering making to the annual stress tests it gives U.S. banks. It would move to a more risk-sensitive, firm-specific approach that "would result in a significant aggregate increase in capital requirements” for the eight largest U.S. banks, she said.
She told the committee that the Fed was reviewing whether the largest U.S. lenders are complying with banking rules in the wake of the Wells Fargo scandal in which the bank settled charges that it opened as many as 2 million unauthorized customer accounts.
"I think it is very important that senior management be held accountable," Yellen told the House panel.
The Dodd-Frank Wall Street Reform law enacted in 2010 expanded the Fed's authority over banks, giving it the ability to break up those considered "too big to fail" and requiring it to monitor for institutions' weaknesses that could wreak havoc across the country's financial system.
Republicans have said those powers go too far, and the central bank's resulting regulations have dried up liquidity, imposed excessive costs on small banks, and crippled banks' ability to lend. Recently, the committee approved legislation crafted by its Republican chairman, Jeb Hensarling of Texas, to curb the Fed's regulatory role as part of a revamp of Dodd-Frank.
Democrats, meanwhile, are pushing the Fed to take full advantage of its authority, with some on Wednesday pressing Yellen to break up Wells Fargo & Co, recently ensnared in a scandal over creating phony accounts in real customers' names.
(Newsmax wire service Reuters contributed to this report).
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