Dick Bove Says, Banks Don’t Want Your Business – May Cancel Your Account and Give Customers the Boot

Not happy with your bank? The feeling is likely mutual.Don’t be surprised if your bank soon decides they don’t want your business anymore, says Rochdale Securities bank analyst Dick Bove.Why?Bank regulators and Congress are looking at ways at making the system more safe and sound in order to avoid another meltdown. What on the surface seems like a wise and prudent decision, however may have unintended consequences, most notably higher fees for bounced checks, credit card balances and the like.”The way a bank discourages a customer from doing business with it is to make the cost of doing business so high the customer gets upset and leaves,” Bove says. “I think that’s the methodology,” although some unprofitable accounts will be closed by the banks, as American Express has been doing. (AmEx canceled 3.3 million cards globally in the second and third quarters, TheStreet.com reports.)Update: In another example, HSBC “has decided retail customers aren’t profitable enough and is demanding those clients remove their gold to make room for more lucrative institutional customers,” The WSJ reports.Bove says as much as 30% of U.S. households could find themselves being forced out of their banks since they’re not deemed profitable.The shift will create investment opportunities as depositors look to other companies to provide banking services. In this scenario, Bove thinks consumer finance firms, payment system companies, pay-day loan companies and pawn shops will pick up the slack.As the government moves to make the cost of banking higher for the banks, they’re going to have to pass on those costs to the consumer,” Bove says. “If the consumer doesn’t like it, the consumer is going to have to rely on these less-established methodologies of getting finance and moving money.” ———————–The FDIC fund that insures bank deposits is $8.2 billion in the hole.The Federal Deposit Insurance Corp. released its latest set of grim banking data moments ago. The FDIC had to set aside $21.7 billion for expected losses on future bank failures as the total number of “problem” banks rose to 552 from 416.There were glimmers of hope. While bad loans continue to beat up bank balance sheets, revenues are returning to the banking sector. Overall, the banking sector was profitable after a $4.3 billion loss in the second quarter and saw just $879 million in earnings last year.

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“Astounded” by Goldman’s Upgrade Banks “Heading Into the Storm” Whalen Says: Tech Ticker, Yahoo! Finance

Goldman Sachs making headlines again. Today, it’s on two accounts.First, Bloomberg is reporting Goldman could earn about $1 billion should the troubled lender CIT Group, enter bankruptcy or otherwise end a $3 billion financing agreement. I’m sure it’s adding fuel to the fire for the “Government Sachs” conspiracy theorists, who probably see it as a repeat of what happened with the AIG bailout.For those that don’t remember, Goldman received $12.9 billion from AIG after the government rescued the world’s largest insurer. That raised suspicions of conflicts of interest and unfair treatment, since then Treasury Secretary Hank Paulson also happened to be a former CEO at Goldman.Chris Whalen of Institutional Risk Analytics is a Goldman conspiracy sympathizer and someone who “doesn’t like their politics.” But, in this case, he doesn’t necessarily think anything is askew. “Like any distressed lender they have a right to their payment. They took the risk,” he admits.What strikes Whalen as more curious is Goldman’s call on the big banks. Citing a positive outlook on earnings, Goldman analysts raised the outlook on banks from neutral to “attractive” this morning. They also upgraded Wells Fargo to “buy” from “neutral”, Comerica to “neutral” from “sell”, and added Capital One to their “conviction buy” list.Whalen is “astounded” Goldman would make such a move “when the banking industry is heading into the storm.” Contrary to the Goldman call, Whalen says the earnings outlook will get worse over the next two quarters, culminating in a bloodbath in the fourth quarter. Part of the problem for Wells Fargo, according to Whalen, is the bank still has plenty of write-downs to come associated with the Wachovia merger, as detailed here. But Goldman employees and shareholders have no fear. Whalen is confident the firm will fare better than those it upgraded today, “because they’re not a bank.” Instead, he says, you must consider Goldman, “a trading operation with a private equity firm attached.”If there is a risk for Goldman, it is political. “They are so visible and so high profile,” Whalen speculates, “that if the economy doesn’t recover next year I think Goldman is in for some severe criticism.”And that, no doubt, would please the Goldman conspiracy crowd.

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We need a Nationalization of our Insolvent Banks

RGE Monitor

RGE Monitor

On Nouriel Roubini’s Global EconoMonitor, Nouriel Roubini argues that it is time for ‘Plan N’, namely a nationalization of insolvent banking systems. The very cumbersome U.S. Treasury proposal to dispose of toxic assets – presented by Treasury Secretary Tim Geithner – can be best understood as a combination of removing toxic assets off the banks’ balance sheet and also providing government guarantees to those private investors that will purchase them (and/or public capital provision to fund a public-private bad bank that would purchase such assets). Markets were expecting a clearer plan, but also a plan that would bail out shareholders and creditors of insolvent banks. Unfortunately that is not politically and fiscally feasible. It is thus time to start to think and plan ahead for Plan N (“nationalization” of insolvent banks). Check out: “It Is Time to Nationalize Insolvent Banking Systems”. Also don’t miss “Roubini Calls For Bank Nationalization – Latest Roubini Interviews on Bloomberg” and the discussion with Nouriel and Nassim Taleb “Predicting the Crisis: Dr. Doom & the Black Swan

The Anglo-Saxon model of supervision and regulation of the financial system has failed. The supervisory system “relied on self-regulation that, in effect, meant no regulation; on market discipline that does not exist when there is euphoria and irrational exuberance; on internal risk management models that fail because – as a former chief executive of Citi put it – when the music is playing you gotta stand up and dance. Check out: “Roubini: Anglo-Saxon model has failed

Fed To Buy Frozen Money Market Assets

Show Me The Money

Show Me The Money

New Money Market Investor Funding Facility (MMIFF)

Fed To Buy Frozen Assets To Meet Redemptions from Money Market Accounts

Federal Reserve will help finance purchases of up to $600 billion in assets from money market mutual funds which have suffered redemptions from investors seeking the safety of government debt. The program start date should be announced by the end of this week. Holy Hell, what’s next?