Elizabeth Warren Explains Why Bank Stocks are so Low

    Bank execs had hoped that Warren would come in slowly as she gets the lay of the land in the Senate. The recent first hearing with her seems to have dashed those hopes:

    "Some bankers hoped that Sen. Elizabeth Warren, the liberal firebrand who helped create the Consumer Financial Protection Bureau, would be subdued in her first term as she learned the ways of the Senate. Warren’s avoidance of the Beltway media appeared to stoke these hopes.
Well, forget it."

    Read more: http://www.politico.com/story/2013/02/why-elizabeth-warren-scares-wall-street-87714.html#ixzz2LGNKsxI3

     Not going to happen. She right away asked a very good question: why are bank stock prices so low? Bank of American is still trying to get over $12-it had gotten close to twice that level in 2010. Her answer: investors don't trust the banks' books:

     “Most big corporations trade well above book value,” Warren said, referring to the measure of a company’s assets minus liabilities. “But many of the Wall Street banks right now are trading below book value. And I can only think of two reasons why that would be so. One would be because nobody believes that the banks’ books are honest, or the second would be that no one believes that the banks are really manageable.”

      Not surprisingly, the bank executives suggest a different explanation: it's Dodd-Frank:

      "Bankers said the real reason large financial institutions often trade below book value is there are concerns over the economy and the many regulations and increased capital requirements enacted through the Dodd-Frank financial reform law and other global responses to the financial crisis.
     
     You get the idea that many of these guys are not fans of Warren. In the latest false equivalence a bank exec groused that she's a liberal Ted Cruz. Not that they will say this in public:

     The bankers spoke mostly on condition that they not be identified by name or firm because they have to deal with Warren for the next six years at least.

      Yes, it's going to be a fun six years. She also called out the regulators-how many cases have they actually filed?

       "Warren’s comment on bank accounting came after she repeatedly — and apparently rhetorically — asked a panel of top regulators to cite the last time they had hauled a big Wall Street bank into court rather than settled. There were mostly halting responses and promises to get back to Warren with more information at a later time."

      "That question — why there has not been more accountability for top bankers in the wake of the 2008 financial meltdown — taps into a deep vein of public anger on both the left and right. And it is Warren’s most potent political weapon."

      "Video of Warren’s appearance at the banking committee got heavy traffic Thursday on Twitter and left-leaning websites. The performance suggests Warren will keep pounding bankers from her perch in the Senate for years to come, including as critical final pieces of the Dodd-Frank law covering bank risk-taking trading and other formerly lucrative activities are completed. Some bankers hoped that final rule-making process would take place far from the spotlight. Warren’s fiery questions on Thursday suggest that will not be possible."

     "Hunt defended the industry, citing recent studies indicating that banks are much safer than they were before the crisis as well as testimony at the hearing from Comptroller of the Currency Thomas Curry on increased capital levels."

     “The United States banking system is safe and sound, supported by historic and permanent capital ratios,” Hunt said. “We are working every day to fulfill the financial needs of the American consumer and small business and will continue to work with any and all lawmakers who seek to assist in this extremely important process.”

     Let's hope so. If they don't, for at least 6 years the bankers are going to have their feet held to the fire. They ought to get to like Warren as they will be seeing a lot more of her.