Banks in Congress's Sights Again

...that's the top headline today on the front page of the print-edition of The Wall Street Journal's Money & Investing section.  The article basically highlights a new plan by Congress to fund highway construction by taking money away from the banks.  Banking stocks have significantly underperformed the rest of the market over the last ten years.

The pain many homeowners suffered at the hands of the banks when the housing bubble burst was totally unfair, and Congress isn't going to let the banks forget it.  Not only has the US justice department recouped tens of billions from the big banks via lawsuits, but the low interest rates set by the Fed hurts banks in particular because their net interest margins are being squeezed.  And now Congress is going after the banks by cutting a century-old dividend payment whereby the banks receive about $1.7 billion per year.  You can read the online version of the article here.

We certainly don't feel sorry for the big banks, but let's not forget that the fire fighters, teachers and municipal workers across the country own just as much bank stock as anyone else via their pensions.  That's right, because those pensions and retirement plans are invested in plenty of bank stocks, pensioners are taking a hit with this too.

With all the money recouped from banks by the government and the massive new regulations that have been imposed since the "great recession," banks have never been able to recover from their losses during the financial crisis.  In fact, over the last 10 years, the financial sector (as represented by the iShares US Financials ETF) has underperformed the S&P 500 by about 70%.

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