US Economy Is Clear for Takeoff: BlackRock's Fink
The U.S. economy is ready to take off, BlackRock Chairman and CEO Larry Fink said Thursday, citing the health of the banks and the nation's energy resources.
"Our banks are the best capitalized institutions in the world," Fink said on CNBC's "Closing Bell". "The problem for banks going forward is not capital, the problem for banks going forward is making sure they originate enough loans."
Fink expects a major pickup in lending from the country's biggest banks to U.S. small- and medium-size businesses as a consequence of the Federal Reserve's quantitative easing.
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Four years into the low interest-rate environment and with bond-buying flattening the yield curve, banks are struggling to replace assets as they mature and net interest margins are falling every quarter, Fink said.
To reverse that, "they have to aggressively be back in the market and lend," he said. That should lead to a pickup in lending to small businesses which, in turn, will stoke hiring and economic activity.
Fink worries about the amount of regulation being placed on financial institutions not just in the U.S. but globally. He told CNBC he would have banks hold more than 9 percent capital but would not have Dodd-Frank or the Volcker Rule.
Dodd-Frank refers to new financial regulations born out of the financial crisis, including oversight of non-bank firms such as hedge funds, while the Volcker Rule restricts banks from making certain kinds of speculative investments for their own profit.
Accounting and regulatory standards are also keeping many institutions and financial institutions in the bond market instead of allowing them to move into other asset categories. "That has been one of the reasons the economy has been dragging," Fink said.
He said political indecision also has been holding the economy back, but he is optimistic. "I truly believe the U.S. economy is ready to be launched," he said, pointing to the health of the banks and the country's energy resources.
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In terms of the stock market, Fink said he wouldn't be surprised to see a 5-percent correction in the near-term, but that shouldn't matter to long-term investors.
"I believe equities again will outperform other forms of investment including bonds over the next 12 months," he said. "People are miscalculating the opportunities they have over long-term investing especially with the high dividends rates you're getting from equities."