Sixth, the industry has performed better. Too many politicians are in search of the next crisis while dismissing the industry's greater strength. This decade, the industry has passed a series of tests such as those related to Greece, Russia, Taper Tantrum and more. The next two weeks should show third quarter bank earnings that are bruised but with balance sheets that remain strong despite issues in China, commodities and capital markets.
This is not to dismiss all the concerns. The ability of shareholders to push for accountability and break-ups gets limited by what we call "economies of clout," or the ability of the largest banks to run roughshod over those who get in their way. The good news is that there has been progress. Annual meetings and other governance matters are less check-the-box exercises. However, one disappointing data point was Bank of America's special shareholder meeting last month. One speaker representing two of the largest public pension funds (CalPERS/CalSTRS) was given only two minutes to speak. In the middle of his closing comments, a Bank of America employee pulled the microphone away even though he travelled 3000 miles and was representing $500 billion of assets and 2 million individuals in California. If banks further restrict the ability of shareholders to hold banks accountable, the views of politicians who are hostile to the industry can get validated, especially if banks were to have new large visible mishaps.
Until then, our view is — with apologies to Yogi Berra — today's bank bashing is political theater that seems like deja vu all over again.
Commentary by Mike Mayo, a banking analyst and managing director with CLSA, a global boutique brokerage firm, and author of the book "Exile on Wall Street: One Analyst's Fight to Save the Big Banks From Themselves" (John Wiley & Sons, 2011).
Disclosures: CLSA, CLSA Americas and/or CA Taiwan receives or has received compensation from Bank of NY Mellon and JPMorgan Chase for non-investment banking services (eg‚ brokerage services) in the past 12 months. The research analyst(s) or his/their household member(s)/associate(s) has/have a financial interest in the securities or related securities of Citigroup, KeyCorp, Morgan Stanley and State Street.