JPMorgan Chase & Co. (JPM), Citigroup Inc (C): Good News for America, Bad News for Banks

Now, as I noted above, there is another side to this story, and that side is the banks’. Despite accumulating massive amounts of capital over the last few years, most of the nation’s largest lenders are still behind in terms of the newly proposed standards.

According to an analysis by The Wall Street Journal, JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc (NYSE:C), Morgan Stanley (NYSE:MS), and Goldman Sachs Group Inc (NYSE:GS) will all have to increase their capital bases — presumably through the retention of earnings. By comparison, both Bank of America Corp (NYSE:BAC) and Wells Fargo & Co (NYSE:WFC) already have more than enough capital accumulated to meet the proposed increase.

And, as a Bloomberg News story pointed out, this does have significance for shareholders. “The biggest U.S. banks, after years of building equity, may continue hoarding profits instead of boosting dividends,” the lede asserts.

At the end of the day, there are two critical points that should be kept in mind, here. First, even at 6%, banks will still be able to leverage up by a factor of nearly 17 to 1 — think about that for a second: 17 to 1. And second, while there is little question that dividend growth may be throttled for the time being, anyone who claims this is bad clearly failed to learn the lesson of the last five years: With less capital, banks fail. And when banks fail, investors lose all of their money.

So, sure, this might be bad for the already unconscionable salaries of Wall Street executives. But it’s unquestionably good for America.

The article Good News for America, Bad News for Banks originally appeared on Fool.com is written by John Maxfield.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America, Goldman Sachs, and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.