Government up to no good, analyst says

The nation's biggest banks are lined up for a lengthy a period of angst over mortgage-related lawsuits, says outspoken Lutz stock market analyst says Dick Bove.

In a recent interview with Bloomberg TV, Bove, with Stamford, Conn.-based Rochdale Securities, says the Federal Housing Finance Agency legal salvo will be a disaster for big banks. In a lawsuit filed against 17 banks earlier this month, the FHFA says lenders misled the agency on the quality of mortgage securities it sold during the housing boom. Citibank and Bank of America are among the defendants.

Bove implies the big winners will be attorneys who will argue cases for years.

“The legal bills that the U.S banks are going to face are going to be a litigation expense similar to tobacco companies or the asbestos companies,” Bove says. “Every year these banks are going to pay out $2 billion, $3 billion or $4 billion, depending on their size, in lawsuits. And that's going to continue for the next five to seven years.”

Bove, not one to mince words, adds that the government's lawsuits will be counterproductive.

“If the goal of the United States is to create jobs and to assist the housing industry by constantly suing and attacking the American banking industry, we know what it has done,” Bove tells Bloomberg. “It has increased unemployment in the housing industry, it has increased unemployment in the finance industry. And it has not done anything to help housing.”