Golden age is coming to an end

Commentary by David Pauly
Jan. 15 (Bloomberg)

There’s no end to the sufferings of bank shareholders.

Banks have traditionally paid hefty dividends. In the years before the onset of the subprime mortgage crisis, payouts by Bank of America Corp., for instance, yielded about 3 percent to 4 percent of the company’s stock price and grew steadily.

Now President-elect Barack Obama plans to take away even that attraction, Lawrence Summers, who will head the new administration’s National Economic Council, informed Congress this week.

Obama -- not unreasonably -- will order the Treasury Department to limit dividends paid by commercial banks and investment banks that receive “exceptional assistance” from the government to “de minimis amounts.”

Summers also told Congress that Obama would place restrictions on banks’ executive pay, stock buybacks and acquisitions of financially strong companies. Amen. Government dictates were sure to follow the welfare checks. They may be what’s needed if banks are to live to pay decent dividends again.