Guardians of Prosperity

November 15, 2013
Bank analyst Bove defends the largest American banks, and bankers in general, in a controversial counternarrative to the dominant theories about the causes of the financial crisis of 2008. Not only have they been unfairly singled out as the culprits, writes the author, but many of the proposed remedies will only make the situation worse. He cites the massive Dodd-Frank legislation and capital guidelines for the Bank of International Settlements as exemplifications of his view. Bove insists that proposed remedies from Richard Durbin, Larry Summers, Barney Frank and others "did not do what they intended to do. They did the opposite, rendering harm to everyone." The author compares the most recent financial excesses with earlier versions of what he considers a syndrome. One of his examples is "Jackson's Folly," when President Andrew Jackson's opposition to the issuance of paper currency brought on the banking crisis of 1837 and a frenzy of state-level wildcat banking and real estate speculation. Bove considers that the expansion of paper money and new avenues for credit in the 1830s was the equivalent of today's electronic derivatives, since it allowed the debt to increase beyond the income available to pay for it. He argues that it is the government, rather than the banks, that bears the major responsibility for the most recent crisis. In the 1990s, the turning points included the elimination of Glass-Steagall regulations and the loosening of Fannie Mae's credit standards. Bove truly believes that large, globally active banks have a vital part to play in maintaining America's worldwide competitive position, and he fears that weakening the banks undermines the international role of the dollar and will ultimately benefit China. The author's purpose is "to re-establish balance." A well-written, lively and provocative argument that may not sway everyone but is certainly worth consideration.

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December 15, 2013
Bove, a well-known bank analyst, explains that the nation needs healthy banks, including the biggest banks, and he sets out to demonstrate that the demonization of banks since the 2008 financial crisis has been mostly exaggeration, although he adds, I have no intention of defending errant banks or rogue bankers. Further, we learn that congressional actions (particularly the Dodd-Frank legislation) have actually harmed consumers and businesses, now getting fewer services at greater cost, and the United States financial system itself has been harmed by anti-bank activity. Bove offers seven solutions for healing the U.S. economy to achieve long-term prosperity, including: regulators must do their job, bank accounting is misleading and must be changed to achieve transparency, and the ban against proprietary trading should be lifted. Banks should be allowed to invest, without limitation, in venture capital concepts. The author's thought-provoking argument is certain to add fuel to the ongoing debate on the 2008 financial crisis and its aftermath.(Reprinted with permission of Booklist, copyright 2013, American Library Association.)