George Soros Calls for Radical Change in Financial Markets

Financier and Philanthropist Speaks at Event Supported by IESE Business School

01/07/2009

George Soros, chairman of Soros Fund Management and the Open Society Institute, believes that the Obama administration's management of the financial crisis has been credible but "well short of perfect." The financier and Obama-supporter was speaking at The Wall Street Journal's Viewpoints Executive Breakfast Series in New York yesterday. IESE Business School and The Boston Consulting Group co-support the series of conversations with global leaders.

In Soros' view, the Obama administration is doing very well in all aspects of government except in the recapitalization of banks and the reorganization of mortgage markets. "As far as the management of the financial system is concerned, I'm afraid that there has been too much continuity between the Bush administration and the Obama administration," he told Deputy Managing Editor of the WSJ, Alan Murray.

In terms of the banks, he would have preferred a compulsory recapitalization with the U.S. treasury acting as underwriter in the case that shareholders failed to step in. The billionaire financier also proposed that the capital be injected into a "new" bank, with the financial institution's toxic assets remaining in the old entity. "I would have been very happy to put my money into the new banks," he said.

On the topic of the mortgage markets, Soros proposes adopting or borrowing from the Danish system. In Denmark, mortgage credit institutions face strict regulations on matching the assets (mortgage loans) and the liabilities (mortgage bonds) based on the "the balance principle" or "the balanced book principle."

"But I don't think the [Obama] administration is ready for radical change," the financier told WSJ's Murray. "And my way might not have worked either," he added.