Billionaire investor George Soros believes U.S. taxpayers’ resentment at some of Wall Street’s leading banks is ‘justified’ because their surging profits were funded by government bailouts, according to an interview published in the Financial Times.
“Those earnings are not the achievement of risk-takers. These are gifts, hidden gifts, from the government, so I don’t think that those monies should be used to pay bonuses,” the paper quoted Mr. Soros as saying in its Saturday edition. “There’s a resentment which I think is justified.”
The U.S. government infused hundreds of billions of dollars to bailing out financial firms, which were the main contributors that triggered Wall Street’s meltdown and dragged the country to the edge of an economic collapse.
Addressing Wall Street’s culture of lavish pay and the creation of a structure that prevents the piling on of excessive risk, Mr. Soros said there was a need to put limits on risks and compensation at big banks, even if that meant banks found it difficult to retain talented risk-takers.
“That would push the risk-takers who are good at taking risks out of Goldman Sachs (GS) into hedge funds, where they actually belong, because hedge funds take risks with their own capital, not with deposits and not with government guarantees,” he said.
Mr. Soros also said the decline of the greenback, which according to him “is a very weak currency except for all the others”, would be limited by its tie to the Chinese currency. “As long as the renminbi is tied to the dollar, I don’t see how the decline in the dollar can go too far,” he said.
“There is a general lack of confidence in currencies and a move away from currencies into real assets”, noted Soros. “There is a push in gold, there’s a strength in oil and that is a flight from currencies.”
When asked if there will be sufficient political will to impose restrictions on big banks and the banking system once things get better, Soros said: “No. No. Because actually banks are very influential politically and now the remaining banks … we’ve got three or four banks that dominate the banking scene in the United States. They have a quasi-oligopolistic position and they want to use that clout to protect that position. So you will have a big political struggle to get the right kind of regulation through.”
Touching on the current state of the economy, Soros said that “the hope of a rapid recovery in the US is misplaced”.
Photo: World Economic Forum