Thoughts from Thomas Hoenig

He's the Vice Chairman of the FDIC. On July 31 he wrote a letter to the Chairman, U.S. Senate Committee on Banking, Housing & Urban Affairs giving his thoughts on Bank Holding Companies (BHCs). Here is the essence of that letter:

• 10 BHCs in the U.S. will distribute, in aggregate, 99 percent of their net income on an annualized basis. Such massive distributions of capital provide no base for their future growth that would benefit our national economy.
• Four of the 10 BHCs will distribute more than 100 percent of their current year’s earnings, which alone could support approximately $537 billion in new loans to Main Street (See columns 3 and 5).
• If share buybacks of $83 billion, representing 72 percent of total payouts for these 10 BHCs in 2017, were instead retained, they could, under current capital rules, increase small business loans by three quarters of a trillion dollars or mortgage loans by almost one and a half trillion dollars.

If the banks are paying out just about all of their income, are they not damaging the economy?