Maria Bartiromo, Anchor, CNBC's "Closing Bell With Maria Bartiromo"
Thomas Joyce of Knight Capital Group expects foreigners to continue to finance U.S. deficits, saying "I don't think the holders of our debt are going to be as irritable as everyone expects them to be." With him are Meredith Whitney, left, of the Meredith Whitney Advisory Group and CNBC's Maria Bartiromo.
The balance sheets of large American banks are weaker than advertised, and the institutions are at serious risk of losing market share in key business lines, a leading bank analyst said.
"They're not dealing with their problem loans," Meredith Whitney of Meredith Whitney Advisory Group said. "They're at serious risk of atrophying."
Whitney said problem loans were impeding bank lending. Banks also suffered from unprofitable core operations, notably credit cards, where the market is "shrinking dramatically." "It's just like Japan's banking crisis. Banks stopped lending, and the predatory lenders came in," she said.
While major banks are focusing on lending to those with the lowest risk profiles — mostly the elderly — Whitney said a generation of young people, with no loyalty to banks, are receptive to new technologies such as mobile payments and prepaid cards.
"The business of finance is changing," she said, adding that there's an "amazing opportunity for periphery players … to gain market share." She projected that the number of Americans with no banking relationship would jump from 26 percent to 35 percent over the next four years.
Her comments prompted panel moderator Maria Bartiromo of CNBC to ask Whitney: "Why do you hate the banks?"
Panelists generally agreed that the economic recovery — and the rally in stocks — was vulnerable to high consumer debt and constricted credit, problems that would ease only with job growth. "Unless the job situation improves … it will be hard to sustain consumer spending," said Patrick Edsparr of Citadel Securities.
Another threat: the budget crunches impacting the majority of state and local governments, which employ 15 percent of the U.S. work force, forcing them to cut jobs and raise taxes. "It seems to me that confidence and markets have gotten a little bit ahead of themselves," Edsparr said.
Still, panelists were cautiously optimistic about the economy and the stock market. Many of those who toiled in the housing sector — the single biggest driver of jobs during the past 15 years and a sector that now faces 20 percent unemployment — could find work building clean energy and infrastructure projects.
They also expected fast growth in emerging markets to provide a new source of demand for U.S. exports. But investors need to be cautious because growth in Asia and elsewhere would fuel a bubble in financial assets and commodities.
Foreigners also would continue to finance America's budget deficit, if only because U.S. markets remain the deepest and most liquid. "I don't think the holders of our debt are going to be as irritable as everyone expects them to be," said Thomas Joyce, CEO of Knight Capital Group, Inc.
Global Conference 2013
Former Prime Minister Tony Blair, philanthropist Bill Gates and Strive Masiyiwa of Econet Wireless discuss advancing prosperity in Africa.
