Kevin O'Leary, an investor who appears on ABC's (DIS) Shark Tank, has some stark opinions about the current state of the banking industry.
O'Leary, the television personality who is known as Mr. Wonderful, offered his comments as congressional hearings were underway about about the collapse of Silicon Valley Bank and Signature Bank (SBNY).
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"Were there idiot bankers? Yes. Were they incompetent? Yes," he said in a CNN interview.
O'Leary made a prediction about the future of regional banks.
"I say this is the beginning of the demise of small banks for sure, and we're going to end up with an oligopoly of very large institutions with an imputed concept that they're backed by the federal government," he said. "Not guaranteed, imputed."
He discussed the mood on Capitol Hill as lawmakers held hearings with officials from the Federal Reserve, the Treasury Department and the FDIC.
"When you have top lawmakers calling you the worst of the worst of the worst it just doesn't get any worse and it can't get any worse for those people," O'Leary said. "But they're not even the mandate or story any more. It doesn't matter."
"The question becomes, what do we do about regional banking in this country going forward?" he asked. "And that's really what's at debate here, because if you're a consumer, and you're sitting with more than $250,000 in a small bank in some state somewhere and you're watching this play out in Washington with all the grandstanding of hearings, what do you do? Do you feel better or worse? I say you feel worse."
O'Leary said he has reached a conclusion about his feelings as a taxpayer.
"I do not want to pay for every idiot banker's mistake. It's not on me as a taxpayer. And there are many idiot bankers," he said. "I know it's harsh words, but let's put it the way it is. These people were incompetent. And that's what happened."
O'Leary talked about who is responsible for mistakes made by regulators and bankers.
"Now why do I own that problem, particularly if I don't live in California? I don't care what they do in California," he said. "And that's why I'm saying, okay, now that we're learning this, what are we going to do about it? What's the new plan?"
Asked what one question is on is mind, O'Leary said, "Do I personally want to guarantee every tiny bank in America? That's the only question we need to answer. Is it yes or is it no? Because you heard (Treasury Secretary Janet) Yellen backpedal from that when she proposed the idea that there's going to be a guarantee no matter what the amount is in every single account in America."
"And the backlash that came through from that was a heavy wave, and she said well, okay, maybe not. And we have the same question back," he said.
Then O'Leary made some remarks about a community's relationship with local banks.
"Let me suggest a solution. If you're a state, and remember why we had regional banks in the first place. Because you as a state said we're different than everywhere else in America, our economy is based on technology," he said.
"Service to community, a kumbaya thing, know your banker, mortgages for your commercial real estate, maybe your home, and it's just a wonderful feeling that you used to ride your bicycle to the regional bank and go in and take out ten dollars," O'Leary added. "That's what the emotional tie to a regional bank is. Is any of that reality today? No. It's all done online, so we don't even need that building."
He concluded the interview with some thoughts on who owns risk and why online banking makes regional banks obsolete.
If you really want to have a regional bank, and you feel as a governor or senator of your state, then you should own the risk. You should tell the people in your voting constituency.
Today, it's different because you basically do everything online. What I'm arguing is I just want you to take ownership of your kumbaya thing.
I'm telling you, if you take a vote in America today, if you go to every single constuency in every city and say, do you want to own the problems of a New York bank or California bank or a Massachussets bank or a Minnesota bank, they'll put up there hand and say what does that have to do with me? I go online and get my credit card from somewhere else.
This is the debate we're having in America. What we're going to see today on the Hill is more bank bashing. And by the way, if I listen to that testimony as an investor, I am never going to buy a bank stock. It's over.
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