Banking analyst Dick Bove, frustrated by a government that he believes has exercised socialist-style control of the banking system, believes it's finally time for big Wall Street institutions to consider breaking up.
The vice president of equity research at Rafferty Capital Markets long has been a proponent of the big banks, arguing that they keep the U.S. competitive globally.
However, he recently has been worried that investors were misunderstanding what was happening with banks and were buying them earlier this year without considering longer-term ramifications — particularly a government hostile to big institutions and economic trends not favorable to financials.
With the less-than-welcoming environment, Bove thinks the Wall Street titans themselves need to rethink the future.
"The time to consider breaking up these companies is here," Bove wrote in a note to clients. "The time for the industry to develop a vision is here. The time to continue to be buried in government by agencies that lean toward socialism and not capitalism and democracy is not likely to end. Banks must take control of their destiny if their stocks are going to do well."
Recent developments have helped fuel the sentiment.
A Michigan lawsuit alleging that the Federal Housing Finance Agency is unconstitutional could endanger Fannie Mae and Freddie Mac, the two agencies that backstop mortgages on the secondary market. The FHFA oversees the two government-sponsored enterprises. If successful, the suit would throw the existence of Fannie and Freddie into question and get the government out of the mortgage finance business.
In a related matter, Bove pointed to a Moelis & Co. report showing the government made just shy of $100 million from Fannie and Freddie since the financial crisis, a development he interprets as further evidence to fuel the government's desire to nationalize the mortgage market.