Banks are trading so far below their book value that they must be good investments right now, right?

A lot of value investors have been burned by such thinking. But if you really believe in the long-term viability of the banks, then why wouldn't you buy? Bank executives are obviously in this category and would love to spend more on stock buybacks, if only to keep their options incentive programs humming. (It would be nice to see more executives spending personal money to buy their own stocks as a show of confidence).

To be sure, lots of banks are doing just that. According to Reuters, Goldman repurchased $2.16 billion of its stock in the third quarter even as it lost $428 million for shareholders. JPMorgan spent $4.4 billion on buybacks after earning $4.3 billion. Both banks would love to buy more.

But regulators are wary of the move, as it erodes capital. JPMorgan Chase CEO Jamie Dimon said that his bank is constrained by regulators from buying more, which is no doubt frustrating to him. Banks would no doubt also like to get more aggressive with dividends, but regulators may be wary of this as well, especially when earnings are so hard to come by and the macro environment seems so weak. 

For more:
- here's the article

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