The fear level in the market is so high right now that there has to be some solution to the greater problems before we can start to look at bank stocks on a fundamental basis, Rochdale Securities’ Dick Bove said in an interview on The Kudlow Report.
Stocks suffered their worst loss in two weeks on Monday after comments from Germany's finance minister caused investors to fear Europe's solution to its debt crisis may not come fast enough.
The solution, Bove said, starts with the recapitalization of European banks.
“The problem is you cannot resolve the Greek problem without debt forgiveness and you can’t give Greece debt forgiveness unless you allow the banks to writedown the Greek debt,” he said. “And you can’t allow the writedown of the Greek debt until you get equity capitalization of those banks.”
And that equity recapitalization has to come from the private sector, he added.
“I’m taking about the private sector putting the money into those banks to rebuild the capital similar to what happened in the United States in the last crisis here in 2008 and similar to happened in the United States in the late 1980s, early 1990s,” Bove said.
Once that debt forgiveness happens, he said, the Europeans can start to rebuild their economies.