Billionaire investor George Soros, who helped U.S. President Barack Obama raise money for his presidential campaign in 2008, on Sunday said he wasn’t happy with Mr. Obama’s handling of the financial crisis.
Mr. Soros said the government should have taken over U.S. banks instead of bailing them out, a move he suggested would have been more popular with Americans.
‘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,’ Mr. Soros said in an interview with CNN. ‘He should have compulsorily replaced the capital that was lost.’
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After taking office at the start of 2009, Mr. Obama stuck to plans implemented by his predecessor George W. Bush to rescue banks by buying toxic assets from them and injecting capital into struggling lenders. As the financial sector recovered, the Obama administration put banks through stress tests to determine how much new capital they would need to withstand a severe recession, but steered clear of nationalizing them.
Mr. Soros said China took a better approach to dealing with the financial crisis by forcing its banks to increase their minimum capital requirements. He suggested that Beijing has in recent years been more successful in its handling of economic policy than the U.S.
He said the ‘market fundamentalist’ belief prevailing in the U.S. that markets correct their own excesses was wrong, and criticized former Federal Reserve Chairman Alan Greenspan for taking that line. Mr. Soros–who as chairman of Soros Fund Management, said he manages about $27 billion in assets–cited his own investment decisions as an example.
‘When I see a bubble, I buy that bubble, because that’s how I make money,’ he said.
Mr. Soros doubled his bet on gold at the end of 2009 as prices for the metal rose, a filing showed in February, a few weeks after Mr. Soros called gold the new asset bubble.
Mr. Soros said the U.S. and China needed to work closely to manage the global economy, calling recent signs of bilateral tension worrying. The two countries disagreed over how to tackle global warming during a meeting in Copenhagen recently, and have faced off over trade and currency issues. Mr. Obama met with Tibet’s exiled spiritual leader the Dalai Lama of Tibet in the White House this month, despite official protests from China.
‘Unless we stop it in the next few months, I think that we could yet fall back into a situation that prevailed in the 1930s, where each country is for itself,’ Mr. Soros said. He said trade protectionism was his top concern, in terms of the global economy’s outlook.
Turning to Europe, Mr. Soros said worries about Greece’s debt had exposed a flaw in the euro’s construction, namely that the 15 euro zone countries, which share a single currency, had a common central bank but not a common Treasury.
‘Either Europe now takes the institutional measures that are needed to make up for the deficiency or, in fact, it may not survive,’ said Mr. Soros. Soros Fund Management is one of several heavyweight hedge funds that are betting that the Greek-debt woes will push the euro lower.
Luca Di Leo