The Wall Street Journal talks to Neuberger Berman's Steve Eisman: "Here's what Eisman is avoiding: 'uninvestable' banks .... While banks might look cheap, he said he doesn't expect their outlook to improve much. Having to pay depositors higher interest rates, prospects of a recession, and increased regulation sap their investability, he says, even if the banking system isn't under any immediate threat."
Making banks "uninvestable" is not a great public-policy outcome, as it increases the chances that either "zombie banks" march along creating a drag on economic growth, or that they need to be closed with the costs socialized to other banks and their customers via deposit insurance premiums. As the September 8, 2023 post here on regional banks concluded, "the government actions to shut down Silicon Valley and Signature mean that anyone investing new capital in a bank or bank holding company risks getting unpredictably zeroed out. That is a deterrent to would-be investors."
It may be that Eisman has it wrong and the banks are a value opportunity rather than a value trap. But maybe if your goal is advancing widely shared prosperity and economic growth, the optimal bank regulation regime is not one that leaves investors thinking banks are uninvestable?
Relatedly, the Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency announced today that they are extending until January 16, 2024 the comment period on their proposed new capital requirements for large banks. The comment period had been scheduled to conclude on November 30. That pushes into next year—if then—clarity on the rules of the road for those banks.
