Bank Break-Ups Would Push U.S. Industry to China, Keating Says

Breaking up the largest U.S. banks would push businesses such as Caterpillar Inc. (CAT) and Boeing Co. (BA) to use Chinese lenders instead, said Frank Keating, chief executive officer of the American Bankers Association.

“The only place in the United States right now that has a balance of payment surplus is financial services. So we’re going to break up the banks and turn over Caterpillar’s business and Boeing’s business to the Chinese,” Keating said today in a Bloomberg Television interview. “Are we going to do that really?”

Keating, whose organization is the largest trade group for U.S. banks, said he is worried about the 2010 Dodd-Frank Act’s effects on smaller commercial banks, which cannot handle the “mountain of regulation, this mountain of uncertainty, this mountain of potential tax and regulatory liability.”

Banking leaders and regulators cannot allow “misguided anger over what happened in the fall of ’08 to destroy what has been essential for the success of America,” he said about U.S. commercial banks. Banking and regulatory leaders must instead ensure that they “lubricate the financial service industry,” Keating said.

To contact the reporters on this story: Emma Fidel in Washington at efidel@bloomberg.net; Erik Schatzker in New York at eschatzker@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

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Aug. 8 (Bloomberg) -- Frank Keating, president and chief executive officer of the American Bankers Association, discusses the impact of scandals and President Barack Obama's remarks on the financial services industry, the importance of community banks and the impact of regulations on bank profitability. Keating, speaking with Erik Schatzker on Bloomberg Television's "Market Makers," also talks about proposals to break up larger banks. (Source: Bloomberg)