Soros: Obama "Lost a Great Opportunity" to Fix the Banks

[joshcryer]

George Soros was an early and avid supporter of Barack Obama, so it's probably no surprise he gives the President high marks for his handling of international affairs, the stimulus package, the budget (the famed financier calls it "very courageous") and for "stabilizing" the financial crisis.

But President Obama "lost a great opportunity" by not taking a more radical approach in dealing with the banks, Soros says. "There's too much continuity with the bumbling and mishandling by the previous administration. Not enough discontinuity."

Specifically, Soros wanted Obama to "come out of the gate with a well considered plan" to recapitalize the banks, rather than continuing with the TARP and related bailouts. But the President may have been hampered by his desire to create consensus, Soros says. "The nature of far from equilibrium situations is that public understanding is always lagging behind events. If you're guided by desire to have consensus, you'll always be a little bit slow."

Essentially, Soros believes we should be following the so-called Swedish solution but fears we are heading down the same policy path as Japan. "We're effectively keeping zombie banks alive," he says.

More at link: http://finance.yahoo.com/tech-ticker/article/228458/Soros-Obama-%22Lost-a-Great-Opportunity%22-to-Fix-the-Banks

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[redqueen]

1. "we should be following the so-called Swedish solution"

If only.

[high density]

2. How are we heading down the same path as Japan with PPIP?

I don't see how the banks remain "zombie banks" when the toxic assets are removed from their balance sheets.

[Kaleko]

4. Read this article...

http://www.huffingtonpost.com/sheila-tendy/finding-a-home-for-toxic_b_184663.html

Sheila Tendy: Finding a Home for Toxic Assets: Where is the Final Resting Place?

Sheila Tendy is a former counsel to the New York State Banking Department


There is a thinly veiled conundrum surrounding the new Public-Private Partnership Investment Program (PIPP) created by Treasury to help get toxic mortgage assets off the books of banks. Who will be the ultimate owners?

Guess who will end up owning these toxic assets after they've been auctioned off?

Yes, it's me and you, the taxpayers.

[high density]

5. Yes...

But how does the "Sweden Solution" lead to a cheaper outcome for taxpayers? At least with PPIP some of the risk is shared with the private sector and this should help with the pricing of the 'assets.' Whether or not the FDIC allows the sort of "circle" investing being speculated about in that HuffPo article remains to be seen. It's also possible the Treasury could make money on these assets assuming our country ever starts creating some jobs once again. Also, the HuffPo piece asserts that a toxic asset is a toxic asset which completely ignores the 6:1 leverage being provided by the FDIC and matching funds from the Treasury. That's quite a lot less toxic unless one figures the Treasury isn't good for it, and if we're at that point then we might as well just give up now.

[truedelphi]

6. Are you aware that 4 about every 700 Billion bucks offered as Bailouts, Toxic Asset Buyouts

Stim Plans etc, the average person in America, even if that person is a wee infant, needs to accumulate about $ 534 just to handle the inflation that that sevenhundred billion costs over the next fifteen months. Is your income going to cover that $ 5434 over the next 12 to 15 months?

Experts don't even know how much we have spent. Senators say the Handouts total 2.9 trillion.

Others say it is 4.1 or even 8.9 Trillion.

When you do the math on how much the average family will need to accumlate just to keep up, we weill be swamped. Then there is the matter of over stimulating an economy and how that results in devaluing the wages. Clinton's mere twenty BILLION bucks worth of infusion into the Mexican economy resulted in wages dropping from 87 cents to 47 cents. So what this will do to our wages, no one is even saying.

As for me, I wish they weren't bailing out Wall Street, but putting it into a Central Bank that could then loan it out to average Americans.

[high density]

9. Inflation?

The loss of trillions in the stock and real estate markets has slaughtered any inflationary issues right now. So far we've spent $4 trillion of about $12 trillion in planned expenditures.

If you're worried about that much inflation, go ahead and load up on TIPS right now and make a killing.

[truedelphi]

12. Being the victim of a medical bankruptcy, I am not really in a position

To Do anything like TIPS. But I appreciate the suggestion.

[truedelphi]

14. Also here is a money line and article that suggest that inflation

Is around the corner.

http://tinyurl.com/c5zqaz

[Median Democrat]

10. If True, Then Its Not Like Japan

In Japan, the banks never sold off the assets, thus they remained zombie banks. If the assets are transferred to the taxpayers, then it is entirely different. The Republican solution was to insure the assets. However, this also creates a zombie bank problem. So, according the article's analysis, it is different from Japan.

[ProSense]

3. Great interview.

Praise for Obama, especially on his budget, and the importance of his election to the Presidency.

Watch the video at the link.





edited extra words.

[Political Heretic]

8. Yes it is a great interivew. Particularly for this reason:

It exemplifies how things are not either / or, and how people can disagree with certain policy decisions of this administration and still support the president.

What I will add though, is that Soros framed all of his remarks in a very adult and non-threatening way, so that even his criticism wasn't bombastic (i.e. saying "I feel we missed a great opportunity" is not as polarizing as "WTF Obama is a whore to banks!11!1" that happens on DU at times)

I found his praise to be as articulate and accurate as his disappointments.

[Political Heretic]

7. I agree with Soros.

We've missed a great opportunity and it will cost us or our children.

I agree agree with Soros' praise of Obama as well. Things don't have to be either / or.

[Danascot]

11. Related article FYI

Soros says U.S. faces “lasting slowdown”

The U.S. economy is in for a “lasting slowdown” and could face a Japanese-style period of relatively low growth with the added problem of high inflation, billionaire investor George Soros said on Monday.

Soros told Reuters Financial Television that rescuing U.S. banks could turn them into “zombies” that suck the lifeblood of the economy, prolonging the economic slowdown.

“I don’t expect the U.S. economy to recover in the third or fourth quarter so I think we are in for a pretty lasting slowdown,” Soros said, adding that in 2010 there might be “something” in terms of U.S. growth.

…more…

http://www.reuters.com/article/newsOne/idUSTRE53537D20090406

[MarjorieG]

13. Each solution has had downsides. Geither originally wanted bad bank to hold toxic

assets and initally worked on that until this public partnership idea. Understand that politically untenable to take apart/down Citicorps, etc., but why didn't the putting all toxic assets in one place get done? That regulation to go into those mixed, mega situations disallow it?

[uponit7771]

15. Zombie banks don't lend, the big 10 are lending....