Monday, March 1, 2010

George Soros Not Satisfied with Barack Obama's Handling of Financial Crisis

George Soros gave an interview with CNN that was aired Sunday in which he was asked about his satisfaction with the job Barack Obama has done as President:

"No I'm not satisfied. The solution that he found to the financial crisis, which was to effectively bail out the banks and allow them to earn their way out of the hole, was, in my opinion, not the right solution. He should have compulsorily replaced the capital that was lost. … This is what they call nationalizing the banks. And he made the political decision that is un-American, will not be accepted."

On taxing hedge funds at lower capital gains rates versus higher earned income rates:

"The earnings of hedge fund managers should be capital gains, sorry that's earnings, that should be treated as earned income." [Yes, he would favor paying the higher tax, I think.]

On reforming the financial markets:

"Look, I think financial reform is not an urgent thing. It is more important to do it right than do it right away, because right now there is no danger of another dreaded boom, quite the opposite. Look, you want to keep regulation to a minimum because financial markets are inherently unstable but regulators are also imperfect. And actually they are worse than markets because first they are bureaucratic and therefore they are always behind the curve and secondly they are subject to political pressures."

On regulators and asset bubbles:

"So you want to keep regulation to a minimum, but you must accept a responsibility that for instance Alan Greenspan explicitly rejected, which is to prevent asset bubbles from growing too big. …That’s because of this false market fundamentalist belief that markets correct their own excesses. They don’t. When I see a bubble, I buy that bubble, because that's how I make money. So you can’t trust the market to correct it, you see. That’s the lesson we have to learn."

Well, that’s interesting. Has Soros really made his billions by buying asset bubbles? And then he presumably sells before the bubble bursts, or he wouldn’t be making any money.

If his idea of financial regulation were implemented, would he need make his money before the regulator bursts the asset bubble? Or would he make his money by the regulator bursting the bubble?

Soros made his name and fortune by breaking the Bank of England in 1992, forcing a devaluation of the British pound. Currently Soros is suspected of playing a large role in currency speculation against the Euro. So is this latest interview advice for Barack Obama, or advice for Europe?

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