GUARDIANS OF PROSPERITY

In GUARDIANS OF PROSPERITY, Bove acknowledges that the banks’ hands aren’t entirely clean. But their growth has created jobs, income, wealth, and prosperity. He argues that limiting the banks is a recipe for crisis. Whenever there’s a saving glut in the economy, the money needs to be invested, and that money will migrate into weaker investments if the economy isn’t growing fast enough to provide valid investment options.

In the financial crisis that began in 2008, the institutions that took the biggest criticism—from the government, the media, and ordinary citizens—were the banks. Although TARP monies essentially saved the nation from a financial catastrophe, the response from the public was outrage. Bankers had created the crisis, they said, and taxpayer money was used to bail out the guilty.

Amid the calls for bankers’ heads and reforms against those “too big to fail,” banking institutions have had one major defender: Richard X. Bove. A high-profile banking analyst and often the lone bullish voice for Wall Street among market hysterics, he has defended the banks as the mechanism that exacerbated (not created) monetary trends that developed elsewhere, including China.

In GUARDIANS OF PROSPERITY, Bove acknowledges that the banks’ hands aren’t entirely clean. But their growth has created jobs, income, wealth, and prosperity. He argues that limiting the banks is a recipe for crisis. Whenever there’s a saving glut in the economy, the money needs to be invested, and that money will migrate into weaker investments if the economy isn’t growing fast enough to provide valid investment options.

If the banks have less money to loan to small businesses and start-up ventures, more money will flow out of the United States (including to low risk borrowers that are actually high risk, such as Greece) and fewer jobs will be created. Regulations intended to protect consumers from so-called “predatory” banking and credit institutions will backfire, and the economic slump will continue.

Bove clearly lays out the ways we can fix the stability and prosperity of the economy, including: • allowing some banks to be “too big to fail” • lessening the demand on liquidity so banks don’t need to sell existing loans • lowering capital buffers so banks can do their main job: making loans Bove argues we must return to a free-market system and stop contracting our financial systems, or risk our global position disastrously. GUARDIANS OF PROSPERITY clearly spells out the way for our government, financial institutions, and media to come to their senses and understand the next steps for saving and growing the economy. Richard X. Bove is a lead researcher at Rafferty Capital Markets and a noted bank analyst who appears frequently on CNBC, Bloomberg, and Fox Business and has been profiled or sought out for commentary by Forbes, Fortune, The Wall Street Journal, The Los Angeles Times, and The National Review. His reports are regularly commented on in the FT’s Alphaville, ZeroHedge.com, WSJ Deal Journal, Seeking Alpha, Business Insider, RealClearMarkets, Dealbreaker, and The Street.