Tags: Obama | small | banks | demise

Analysts: Obama’s Re-election to Bring Demise of Small Banks

Tuesday, 13 Nov 2012 08:11 AM

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President Barack Obama’s re-election will herald in the demise of thousands of smaller banks, analysts say.

The combination of loose monetary policies supported by the White House that have kept interest rates at rock-bottom levels and tough regulations on capital levels outlined under the Dodd-Frank law won’t allow banks to drum up enough business to survive.

“There are a large number of banks that are limping toward oblivion,” said Kamal Mustafa, who heads up bank consulting firm Invictus, according to Fortune.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

“Capital requirements have gone up too fast, and rates have gone too low. There’s no way out.”

Other analysts agree.

“It’s fairly clear that 50 percent of the banks in the U.S. need to be recapitalized,” said Dick Bove, a banking analyst at Rochdale Securities, Fortune added.

Emmett Daly, a principal at Sandler O’Neill who specializes in small banks, told an industry conference hosted by Mergermarket recently that the number of banks in the United States would shrink to a few hundred from more than 7,000 today.

Bank of all sizes are dealing with increasing regulations in the wake of the financial crisis, especially those outlined under the Dodd-Frank financial reform law, which gives regulators greater say-so on bank capital requirements, liquidity levels and risk-management practices and would also ban banks from trading their own money for profit in capital markets.

Such regulations arguably prevent repeat performances of past crises but in the meantime, banks will spend more time worried about compliance and less time lending.

“Who the hell can understand 30,000 pages [of rules] and know what that actually means and know what we’re supposed to be doing?” said Doug Peebles, chief investment officer for fixed income at Alliance Bernstein, according to The Star-Ledger.

The Glass-Steagall Act of 1933, which prevented commercial banks and investment banks operating under one roof up until its repeal in 1999, was only 37 pages long, Peebles added.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

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