What do bank regulations and drone attacks have in common? If you answered, "Nothing, what a stupid question," then you are obviously not famous bank analyst Meredith Whitney!
Whitney, as she often does, took to CNBC Monday afternoon to talk about stuff, including her optimistic outlook on banks. Host Maria Bartiromo asked Whitney why she was so in love with banks when mean politicians are always saying mean things about them and trying to regulate them and other mean stuff (I'm paraphrasing, of course). Whitney then proceeded to string together several words that were awe-inspiring in their wrongness:
"The regulatory changes are always a worry for me because they're like a drone attack," she said.
There's the first wrong thing: Regulatory changes are nothing like a drone attack in that they leave no one dead. Unless you count the insects Jamie Dimon regularly mutilates in his impotent rage.
"You don't know where they're coming from, and all of a sudden either a new politician is creating one for their own political ambition or the rules are changing constantly so you're always on the defense," Whitney said.
There's a second wrong thing, or at least a presumptuous thing: We can assume that maybe, yes, some politicians propose rules for their own political ambition. That sort of thing has been known to happen. But this thesis elides the not-small matter of the worst financial crisis since the Great Depression, which a great many of the new rules proposed in the past four years have intended to address.
But Whitney had only just begun to be wrong!
"It is clear that you have across-the-aisle bipartisan support to go after the financials and go after the banks," she began, not altogether wrongly. "Banks now being so well-capitalized are also a great place to go and try to extract money, extract fines," she continued, wandering into vast, open fields of gently waving wrongness. "That's certainly what the Consumer Financial Protection Bureau is doing. I think that's what [attorneys general] are going to do. And so it will be a steady beatdown."
First of all, only in the universe of mainstream bank analysts are banks so well-capitalized that we can all just lie in front of them like pigs at the trough and feast on their cash. In their new book, The Bankers' New Clothes, Stanford professor Anat Admati and Martin Hellwig of the Max Planck Institute suggest banks are in fact under-capitalized. Let's just say that, at the very least, this idea is arguable. And picking on the CFPB is odd, given its relative dearth of money-milking enforcement actions so far.
Whitney got famous for predicting before the financial crisis that Citigroup was under-capitalized and would need to cut its dividend. Since then her predictive powers have failed her, perhaps because she is distracted by the constant buzzing of drones overhead.
More than two years ago she took to "60 Minutes" to declare that there would be "hundreds of billions of dollars" worth of "sizable" municipal defaults within a year. Those defaults have stubbornly continued to not happen, year after year. When she first issued it, Whitney's warning caused a short-term sell-off in the muni-bond market. Since then, her prediction has joined Bad Call Valhalla, along with Dow 36,000 and the Donald Luskin column that earned him the title of "Stupidest Man Alive."