Sunday, April 19, 2009

George Soros: We Need More and Better Regulation

Wall St. guru George Soros gave his solution for the current financial crisis during an interview Maria Bartiromo. Read the full transcript:

BARTIROMO: LET'S TALK ABOUT THE MONEY FOR THE IMF. IT COULD RISE TO $750 BILLION. IS THAT ENOUGH? AND MORE IMPORTANTLY, WHO SHOULD GET THE MONEY?

SOROS: WELL, THEY MANAGED TO PUT TOGETHER A BIGGER PACKAGE THAN ANYBODY EXPECTED. AND VERY IMPORTANT IS THE ISSUE OF SPECIAL DRAWING RIGHTS. $250 BILLION. THAT IS EFFECTIVELY CREATING - INTERNATIONALLY CREATING - NEW MONEY. AND THAT WILL HELP TO ALLOW THE COUNTRIES THAT ARE NOT ABLE TO PRINT THEIR OWN MONEY THE WAY WE CAN, ACTUALLY TO STIMULATE THEIR ECONOMIES. AND I THINK THE WAY FOR THE RICH COUNTRIES TO TRANSFER THE ALLOCATIONS TO THE MOST NEEDY COUNTRIES CAN BE WORKED OUT.

BARTIROMO: SO ARE YOU SAYING THE EFFORTS AS FAR AS THE IMF AND THE COMMUNIQUÉ OVERALL HAVE COMPLETELY CHANGED YOUR MIND? A WEEK AND A HALF AGO YOU WERE OUT VERY VOCAL SAYING LOOK, THE IMF IS GOING TO HAVE TO BASICALLY BAIL OUT THE UK, HERE WE ARE SITTING IN ONE OF THE GREATEST CITIES IN THE WORLD -

SOROS: NO. THAT WAS A MISLEADING HEADLINE GIVEN TO AN INTERVIEW WHERE I SAID IT'S MOST UNLIKELY THAT BRITAIN WOULD NEED TO GO TO THE IMF. HOWEVER, THE FACT THAT WE CREATED SUCH AN OUTCRY SHOWS WHAT A STIGMA THERE IS ATTACHED TO HAVING TO GO TO THE IMF.

BARTIROMO: A LOT OF PEOPLE WHEN YOU WERE TALKING ABOUT THE UK AND THE NEED FOR HELP AND REALLY A BAILOUT, PEOPLE WERE SAYING, WELL, WAIT A SECOND, GEORGE SOROS YEARS AGO SHORTED THE POUND AND MADE MONEY ON THIS AND MAYBE HE'S PLAYING HIS BOOK. IN FACT, LORD MANDELSON SAID THAT. ARE YOU SHORTING THE POUND RIGHT NOW?

SOROS: NO, I'M NOT. FIRST OF ALL, AGAIN, I'VE WITHDRAWN NOW FROM ACTUALLY RUNNING THE FUND. I DID IT LAST YEAR. WE CAME THROUGH IT. NOW I'VE HANDED IT BACK TO THE PEOPLE WHO CAN DO IT. SO I'M OUT OF THE MARKETS, AS I WAS BEFORE I CAME OUT OF RETIREMENT. SO I'M BACK IN RETIREMENT.

BARTIROMO: I DON'T KNOW IF YOU'RE GOING TO BE ABLE TO STAY IN RETIREMENT VERY LONG, FRANKLY. BUT LET ME ASK YOU ABOUT THE OPERATIONS IN TERMS OF HEDGE FUNDS OVERSIGHT. BECAUSE THIS IS ANOTHER THING THE GROUP SAID, THAT THEY WANT MORE REGULATION ON HEDGE FUNDS. DID YOU AGREE WITH WHAT THEY SAID AND WHERE THEY'RE GOING IN TERMS OF MORE OVERSIGHT?

SOROS: WELL, I THINK YOU ABSOLUTELY WILL NEED MORE REGULATION. BUT YOU REALLY NEED TO HAVE BETTER REGULATION. AND YES, WE HAVE ALLOWED THE MARKETS A FREE HAND, AND OF COURSE THAT WAS VERY UNSOUND. BUT WE DON'T WANT TO GO OVERBOARD NOW WITH REGULATIONS BECAUSE THE FACT THAT MARKETS ARE IMPERFECT, THAT THEY DON'T ANTICIPATE THE FUTURE CORRECTLY, REGULATORS ARE JUST AS IMPERFECT.

BARTIROMO: CAN YOU CHARACTERIZE THE SITUATION FOR US IN EASTERN EUROPE RIGHT NOW?

SOROS: WHAT HAPPENED WHEN THE WESTERN EUROPE AND AMERICA GUARANTEED THE BANKING SYSTEM THE OTHER COUNTRIES IN EASTERN EUROPE COULDN'T PROVIDE SIMILARLY CONVINCING GUARANTEES, AND THE BANKS IN THE WEST STARTED PULLING THEIR CAPITAL OUT OF THERE AND PULLING THEM BACK. AND THE NATIONAL REGULATORS ALSO ENCOURAGED THE BANKS TO LEND AT HOME AND NOT ABROAD. AND SO THAT CREATED A CRISIS FOR EASTERN EUROPE.

BARTIROMO: WHAT ARE YOUR THOUGHTS ON THE DEVELOPMENTS SURROUNDING MARK TO MARKET? FASBY COMING OUT AND SAYING THAT THEY DO WANT TO MAKE IT EASIER, A LITTLE MORE LAX IN TERMS OF THE REGULATION FOR MARK TO MARKET. WHAT ARE YOUR THOUGHTS ON THAT?

SOROS: THERE I REMAIN REALLY CRITICAL BECAUSE I THINK MUCH MORE EFFECTIVE WOULD HAVE BEEN TO RECAPITALIZE THE BANKS. AND BECAUSE OF THE HISTORY OF THE WAY THE TARP MONEY WAS SPENT, IT WAS REALLY VERY MESSY AND VERY BADLY DONE. AND BECAUSE OF THAT THERE'S INCREASING RELUCTANCE BY CONGRESS TO MAKE NEW MONEY AVAILABLE. AND YET IT WOULD BE MUCH MUCH BETTER TO CREATE CLEAN BANKS. BANKS THAT ARE ABLE TO LEND. AND I THINK WE MISSED THE BOAT ON THAT. AND THAT MEANS THAT WE WILL BE SPENDING A LONG TIME ALLOWING THE BANKS TO DIG THEMSELVES OUT OF A HOLE. AND WHILE THEY ARE DOING THAT, THEY WILL NOT BE REALLY PROVIDING SUFFICIENT CREDIT TO CARRY ON BUSINESS. THEY WILL BE CHARGING A LOT AND GENERALLY IT'S GOING TO WEIGH ON OUR ECONOMY FOR A PERIOD OF TIME.

BARTIROMO: I KNOW YOU SAW THE STORY ABOUT SOME HEDGE FUNDS SAYING, "LOOK, WE'RE GOING TO LEAVE LONDON. THE TAX SITUATION IS NOT FAVORABLE. WE DON'T LIKE THE BUSINESS CONDITIONS HERE. WHAT DO YOU THINK ABOUT THAT?

SOROS: WHERE ARE THEY GOING TO GO? ANOTHER PLANET? I MEAN, YOU KNOW, THIS IS - THERE IS NO ALTERNATIVE BECAUSE NOW WITH THE TAX HAVENS BEING BROUGHT UNDER CONTROL I THINK HEDGE FUNDS WILL HAVE TO GET USED TO BEING REGULATED.

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