The economic recovery isn't as strong as first thought. Revised GDP figures released this morning show the economy grew at a 2.8% annualized pace in the third quarter, less than the 3.5% initially reported. The revision was in-line with expectations but shows the economy didn't have as much momentum heading into the fourth quarter as previously believed.

Unlike Wall Street traders, consumers seem to know the recovery is "anemic," as Barry Ritholtz, CEO of Fusion IQ, describes it. The Conference Board's latest confident survey shows Americans feel worse about the current economic situation than they did in March, when the stock market was making new lows. (Thanks to Dan Greenhaus of Miller Tabak for pointing this out this last fact.)

Yet, stocks are still near their highs of the year. Going into the final hours of trading Tuesday, stocks were in the red but well off the lows of the day.

What's driving the disconnect between Wall Street and Main Street?

Ritholtz says it's a classic example of bad news being good news on Wall Street. "We're in a cycle that's not based on profitability, not based on expanding economy but based on all sorts of government supports," he says. "Bad news is going to be good news for the next couple of quarters probably."

That's because...

Not happy with your bank? The feeling is likely mutual.

Don't be surprised if your bank soon decides they don't want your business anymore, says Rochdale Securities bank analyst Dick Bove.

Why?

Bank regulators and Congress are looking at ways at making the system more safe and sound in order to avoid another meltdown. What on the surface seems like a wise and prudent decision, however may have unintended consequences, most notably higher fees for bounced checks, credit card balances and the like.

"The way a bank discourages a customer from doing business with it is to make the cost of doing business so high the customer gets upset and leaves," Bove says. "I think that’s the methodology," although some unprofitable accounts will be closed by the banks, as American Express has been doing. (AmEx canceled 3.3 million cards globally in the second and third quarters, TheStreet.com reports.)

Bove says as much as 30% of U.S. households could find themselves being forced out of their banks since they're not deemed profitable.

As the government moves to make the cost of banking higher for the banks, they're going to have to pass on those costs to the consumer," Bove says. "If the consumer doesn’t like it, the consumer is going to have to rely on these less-established methodologies of getting finance and moving money."

With the financial sector ETF up about 135% from its March lows, some of the banking sector's most notable bears are on the prowl again:

• Last week, Meredith Whitney told CNBC "I haven't been this bearish in a year" and was even more downbeat in an interview with Bloomberg radio: "The banks are still grossly overvalued," she said. "People are expecting something great to happen in 2010 and I think they are going to be severely disappointed."
• Last month, IRA's Chris Whalen told Tech Ticker the fourth-quarter is going to be a "bloodbath" for the bank earnings.

Dick Bove, banking analyst at Rochdale Securities, doesn't disagree the sector's earnings are likely to be weak in the fourth-quarter and first half of 2010. But as is so often the case, he's willing to provide the bullish ying to the bearish yang of Whitney and Whalen.

"The potential growth you get from buying these stocks at the current time is so attractive that it's worthwhile buying them and closing your eyes concerning what earnings are going to be this quarter or the following quarter," Bove tells Henry and me in the accompanying video.

That comment pertains generally to the sector, save regional banks, and especially investment banks exposed to the "explosion of M&A activity" Bove sees in 2010, including Goldman Sachs, Morgan Stanley, Evercore Partners and Lazard.

Incredibly, the quote above was made specifically in reference to Bank of America and Citigroup, the two struggling giants of U.S. banking...

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Suddenly, it's the least attractive job in the country.

Bank of America has been searching for a new CEO for months, ever since battered Ken Lewis announced that he was stepping down.  But no one wants the job. 

Why not?

Because they'll have to listen to annoying government bureaucrats vilify them all day, says analyst Dick Bove of Rochdale Securities.  Because they'll be unable to hire top people because of pay constraints.  Because they'll be forced to chop up the company instead of reaping the rewards of scale.  Because they'll be limited to a pay package that would make the average dime-a-dozen Wall Street managing director go bitching to his boss about how he was being underpaid.

All of which means, Bove says, that Bank of America's board once again looks incompetent. ...

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Peter Schiff's views as an author, investor and free market idealist are no secret: Abolish the Fed, buy gold and avoid the dollar. With that in mind, Sunday night was something of a dream come true for the President of Euro Pacific Capital.

Thanks To Princeton University's Business Today, Schiff went head to head in New York City with St. Louis Federal Reserve President James Bullard and former Federal Reserve Vice Chairman Alan Blinder in a panel titled, "Challenges of the Global Slowdown: Redefining Government Regulation."

It might as well have been called "Schiff Blames the Fed for the Financial Crisis."

We caught up with Schiff after the panel to discuss some of the points mentioned in greater detail. (Click here for our one-on-one intereview with Bullard from the confab.)

Schiff on capitalism

From The Business Insider, Nov. 23, 2009:

Microsoft (MSFT) wants to pay News Corp (NWS) and other large publishers to de-list their Web sites from Google's (GOOG) search index, the Financial Times reports.

The idea is to force Google (GOOG) to pay for content, thinning its currently fat margins.

Problem is, we can't imagine Google going for it.

For one, the FT reports that Google’s UK director Matt Brittin told a conference last week that Google did not need news content to survive.

“Economically it’s not a big part of how we generate revenue,” he said

For another, we can't imagine links to worthwhile stories originating from News Corp not finding their way onto sites that will happily remain indexed in Google's search engine free of charge.

Still, if News Corp were to "de-list" from Google, we'd expect to see all kinds of ads touting Bing as the only place to find the Wall Street Journal and MySpace pages online. Maybe that'd swing search engine share some, but we doubt it.

More coverage from The Business Insider:

• Droid price drops to $120
• AOL unveils new brand, new logos

From The Business Insider, Nov. 23, 2009:

The New York Times -- not usually the first publication you'd think of when it comes to calling for fiscal prudence -- sounds the alarm over the government's massive debt load.

The premise is that, although we're fine now, borrowing money cheaply, we've got a huge refi coming up, and there's an excellent chance it will be way more expensive.

With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.

In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.

A really astounding fact, noted in the article...

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More coverage from The Busines Insider:

• Ben Bernanke's 1938 parallel
• Goldman super bullish on China

On the heels of Goldman CEO Lloyd Blankenfein's apology for his firm's role in the financial crisis, some of Goldman's largest shareholders are unhappy more of Goldman's prosperity isn't being passed along to them, The WSJ reports.

Despite record net income and compensation, analysts forecast Goldman's 2009 earnings per share will be 22% lower than in 2007, and roughly equal to its 2006 earnings, according to Thomson Financial. The drop in EPS is caused by the more than 100 million shares issued in the past year to bolster Goldman's financial position and capital.

While the article doesn't name the "miffed" shareholders, Goldman's five-largest shareholders as of Sept. 30 are mutual funds:

1. AllianceBernstein
2. Barclays PLC unit
3. State Street unit
4. Vanguard Group
5. Wellington Management

As Aaron and Henry discuss in the video, the standard payout ratio of 50% of profits Wall Street has long enjoyed does not make sense in this economy. Wall Streeters could stomach a lot less, especially when most individual Americans are pocketing a 0% payout.

Of course this mounting criticism comes amid Matt Taibbi's "Vampire Squid" takedown of Goldman this summer...

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Are we on the verge of total economic collapse?

Don't laugh. The french firm Societe Generale thinks so.

The brokerage firm has put the fear of God in clients recently by predicting that developed economies and markets are going to collapse under a monster debt load and that gold is going to soar to $6,000 an ounce.

Fortunately, not everyone feels that way.

Many on Wall Street, in fact, have suddenly gotten quite bullish after missing a lot of the extraordinary 65% rally we've had since the lows of March. Hopefully, these folks--the "V-shaped recovery" crowd--are right, and the bad news of the last couple of years will soon be a distant memory.

Aaron and I are skeptical, though. The aftermath of debt-fueled financial crises like the one we went through usually lasts for many years, if not decades. Japan has been struggling to right its ship since its own bubble burst in 1990, and the country still isn't growing strongly again. (Japan's stock market, meanwhile, trades at a fifth of its 1989 high).

A fight has broken out among economists about whether what ails the country is too much spending or too much debt.

Debt fear-mongers, such as Niall Ferguson, believe that the country's wild borrowing and spending spree has put us on the road to ruin.

"Stimulists," such as Paul Krugman and our guest, professor James K. Galbraith of the Univ. of Texas, believe that spending aggressively and piling up debt is by far the lesser of two evils and that we need to launch a second stimulus immediately. 

Why do professors Krugman and Galbraith believe this? 

Because, in their opinion, skyrocketing debt is far less of a concern than letting the country's people and productive capacity lie fallow for the decade or more that it will take back to get to full employment.

Earlier:

• "A Govt. Not Run by the Financial Sector": Galbraith's Rx for Financial Reform
• "A Truly Extraordinary Slump": Reports of Recovery Premature, Galbraith Says

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