Big U.S. banks control America - the "Tail Wags the Dog" - a popular sentiment among many Americans.  They firmly believe that when big banks sneeze, America catches a cold - as happened in 2008 when the great credit crisis swept across the United States and the world. Rochdale Securities analyst, Wall Street legend, and contrarian investor Dick Bove, strongly disagrees.  He speaks with conviction when he says that the U.S. needs more big banks, not less, if it is going to remain a world power and avoid the fate of some debt-laden European countries. He recently argued against efforts to split up the nation's largest financial institutions, when he said the dollar is at risk of losing its standing as the world's reserve currency.  Such a scenario would mean that foreign creditors could demand that the U.S. pay its more than $15 trillion of outstanding public debt immediately. Instead, the populace should support growing the banking system and unleashing big institutions "to use the tools they have developed" - that, Mr. Bove proclaims, will protect American financial interests globally.

"In doing so, the biggest American banks will aid the growth of the American economy and protect American prosperity,  The problem is the United States does not want this. It is shrinking its big banks."

"It is using every political technique it can muster to reduce their profits and profitability.  It is on a vendetta to curtail banking activity."

It's difficult to tell where exactly we are in this argument, but this much can be said - there are strong voices on both side of the aisle. Dallas Federal Reserve President Richard Fisher has led the anti-banking charge, saying that the largest banks have only gotten bigger since the crisis and continue to pose a major threat to the American economy.  He would recommend that a good starting point would be to split-up Bank of America, Citigroup and JPMorgan Chase. Bove's Analysis. But Mr. Bove, who's widely followed on Wall Street, remains bullish on banks in general.  And he reiterates that the presence of big banks is important for the US to maintain its position on the global stage, particularly in light of how much debt the government continually issues to fund its deficit spending.  Mr. Bove points to the fact that, out of 21 primary dealers for U.S. Treasurys, 14 are foreign banks.  In 1974, those institutions were exclusively American. He points to existing advantages that currently favor the European Union and nations such as China and Japan - the have larger populations, more currency afloat , and as global population grows, their numerical superiority will only get larger.

Thus, Mr. Bove says, "The biggest benefits that the United States gains from having the global reserve currency is that this nation has never really had to concern itself with its budget or trade deficits."   He adds:  "Unlike other countries that overspend and then must develop systems to pay back what they borrowed, the United States has never had to worry about this problem.  It simply prints money and uses the printed money to pay its bills. No other nation in the world is allowed to do this."

However, that ability cannot continue forever if U.S. banks continue to fall behind their global competitors - and he envisions riots on par with those in Greece if the U.S. is forced into austerity measures because it cannot keep printing money to pay its debts. While the scenario may sound extreme, Mr. Bove insists that action must be taken.  Mostly, he recommends to "build huge banks in America" so they can continue to spread dollars around the globe, in spite of the current regulatory and political climate, that's tilted against the big banks. According to Dick Bove, the strategies he espouses deal with "more than simple isolationism.  It is a direct attack on the health and prosperity of this country by those most responsible for protecting it." Just remember Bove's words, when someone asks for your opinion about big American banks. [NetNet, 4/12/12]