Wall Street Wins, Main Street Loses in Bank Overhaul: Bove


The financial reform bill will likely hurt consumers more than banks because Wall Street will find a way to get around it, Richard Bove, banking analyst at Rochdale Securities, told CNBC Friday.

A panel of Congressional lawmakers reached an agreement in the early hours Friday on the landmark bill. Bove warned earlier this week that the bill would be a "disaster" for banks and consumers.

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"I think that I would be buying bank stocks this morning," Bove said. "The bill is now behind us."

Bank stocks are likely to rally over the next two weeks as negativity surrounding the banks will be lifted and President Barack Obama will start supporting the financial industry instead of attacking it, he said.

"This is a populist surge of activity to say 'hey, we'll get these bad guys on Wall Street that did bad things to you,'" Bove said.

Banks will raise prices to offset the costs of the bill and will be innovative enough to get around a new rule that would ban proprietary trading by banks unrelated to their clients, he added.

When asked if Wall Street is winning and Main Street is going to be the loser, Bove replied: "That's exactly what's going to happen."

"The people who get hurt are everybody else," Bove said, adding that banks might resort to measures such as putting charges of $12 to $15 on bank accounts to make up for the costs of the new laws.

Bank Stocks Bove Likes

"I talked to the CEO of one of the five largest banks in the country ... I said 'this bill is going to knock 33 percent of your customers out,' he said 'you're crazy, Dick, it's going to be 20 percent,'" he said. "The point is that the banks can get this money back, the consumer can't."

When the credit card bill was passed, interest rates were raised for some consumers, others had their fees increased while some lost their access to credit, he noted.

"You're going to see exactly the same thing happening," Bove said.

But banks are overcapitalized anyway, and the new measures will mean that, despite this, they will still not lend, choking the recovery, he said.

"Not one person in Congress has looked at the impact on money supply as a result of what's being done to the banking industry," Bove said.

Steps taken by the Federal Reserve to pump liquidity in the economy is not translating into the money supply because banks don't lend enough, since the government has forced them to overcapitalize, he said.

"You must have banks lending money in order to grow money supply," Bove said.

There are three big banks that are "dramatically underpriced": JPMorgan, Bank of America and Citigroup, according to Bove.

But he said he thinks the safest bet are regional banks such as PNC, BB&T, Comerica and Fifth Third, which do not have a big part of their businesses depending on consumers, he added.

- Disclosure information was not immediately available for Dick Bove and his company.