Posted on 09/30/2008 9:55:47 PM PDT by jessduntno
Soros floats alternative bailout plan with Dems By Alexander Bolton Posted: 09/30/08 11:19 PM [ET]
The billionaire financier George Soros, a major Democratic financial backer, is floating his own rescue plan among Democratic lawmakers who are uncertain what to do in the wake of a surprise defeat of a proposed $700 billion rescue package proposed by Treasury Secretary Henry Paulson.
Soros has outlined his plan in an opinion editorial in the Financial Times and circulated a concept paper among decision-makers.
Specifically, the liberal philanthropist has proposed that government funds should be used to recapitalize the American banking system by purchasing equity in banks and investment firms.
Democrats are fond of Soros, who has emerged as one of the party’s biggest financial backers in recent years. He spent close to $24 million to defeat President Bush in the 2004 election.
Robert Shapiro, chairman of Sonecon, an economic advisory firm, who served as Commerce Department undersecretary during the Clinton administration, raised questions about Soros’s proposal.
He said that if the government bought stock in troubled firms, a problem would arise regarding how Uncle Sam would be represented as a shareholder.
“How does the government vote the shares?” he asked. “It puts them in a potential conflict of interest. Regulatory interests may hurt the bottom line.”
(Excerpt) Read more at thehill.com ...
Anybody still think he wasn’t involved with the crash in some way?
Pure Hegelian Dialectic.
Here he comes right on cue with “synthesis”.
Finally! The answer we’ve been waiting for. Thanks George.
I have been wondering all along how this POS figured in in all of this- and I KNOW he’s in there somewhere. THIS is where Obama gets HIS view of himself as a “messiah”. He’s learned from the best.
” the liberal philanthropist has proposed that government funds should be used to recapitalize the American banking system by purchasing equity in banks and investment firms. “
NATIONALIZED BANKS!
YIKES. Now I know why i was critical of those who called Paulson’s bailout ‘socialism’. it’s seemed overkill.
BUT THIS is Socialism.
This guy gave big $$$ to Obama. Who knows, he could be manipulating markets to bring firms like Lehman down.
I would not be shocked if Obama implements the Soros plan IN HIS FIRST 100 DAYS.
‘Tis rather suspicious.
Soros looking for someone to cover his losses?
One thing for sure, George Soros is either going to go bankrupt or succeed beyond his wildest dreams with the upcoming Presidential Election.. I sure hope it is bankrupt for Soros.
Whatever Soros wants, I want just the opposite.
http://www.ft.com/cms/s/0/d68e10cc-8f45-11dd-946c-0000779fd18c.html
Recapitalise the banking system
By George Soros
Published: October 1 2008 02:05 | Last updated: October 1 2008 02:05
The emergency legislation currently before Congress was ill-conceived - or more accurately, not conceived at all. As Congress tried to improve what Treasury originally requested, an amalgam plan has emerged that consists of Treasury’s original Troubled Asset Relief Programme (Tarp) and a quite different capital infusion programme in which the government invests and stabilises weakened banks and profits from the economy’s eventual improvement. The capital infusion approach will cost tax payers less in future years, and may even make money for them.
Two weeks ago the Treasury did not have a plan ready - that is why it had to ask for total discretion in spending the money. But the general idea was to bring relief to the banking system by relieving banks of their toxic securities and parking them in a government-owned fund so that they would not be dumped on the market at distressed prices. With the value of their investments stabilised, banks would then be able to raise equity capital.
The idea was fraught with difficulties. The toxic securities in question are not homogenous and in any auction process the sellers are liable to dump the dregs on to the government fund. Moreover, the scheme addresses only one half of the underlying problem - the lack of credit availability. It does very little to enable house owners to meet their mortgage obligations and it does not address the foreclosure problem. With house prices not yet at the bottom, if the government bids up the price of mortgage backed securities, the taxpayers are liable to loose; but if the government does not pay up, the banking system does not experience much relief and cannot attract equity capital from the private sector.
A scheme so heavily favouring Wall Street over Main Street was politically unacceptable. It was tweaked by the Democrats, who hold the upper hand, so that it penalises the financial institutions that seek to take advantage of it. The Republicans did not want to be left behind and imposed a requirement that the tendered securities should be insured against loss at the expense of the tendering institution. The rescue package as it is now constituted is an amalgam of multiple approaches. There is now a real danger that the asset purchase programme will not be fully utilised because of the onerous conditions attached to it.
Different focus
‘Tarp’s adverse consequences could be mitigated by using taxpayers’ funds more effectively. If Tarp invested in preference shares with warrants attached, private investors, including me, would jump at the opportunity’
Nevertheless, a rescue package was desperately needed and, in spite of its shortcomings, it would change the course of events. As late as last Monday, September 22, Treasury secretary Hank Paulson hoped to avoid using taxpayers’ money; that is why he allowed Lehman Brothers to fail. Tarp establishes the principle that public funds are needed and if the present programme does not work, other programmes will be instituted. We will have crossed the Rubicon.
Since Tarp was ill-conceived, it is liable to arouse a negative response from America’s creditors. They would see it as an attempt to inflate away the debt. The dollar is liable to come under renewed pressure and the government will have to pay more for its debt, especially at the long end. These adverse consequences could be mitigated by using taxpayers’ funds more effectively.
Instead of just purchasing troubled assets the bulk of the funds ought to be used to recapitalise the banking system. Funds injected at the equity level are more high-powered than funds used at the balance sheet level by a minimal factor of twelve - effectively giving the government $8,400bn to re-ignite the flow of credit. In practice, the effect would be even greater because the injection of government funds would also attract private capital. The result would be more economic recovery and the chance for taxpayers to profit from the recovery.
This is how it would work. The Treasury secretary would rely on bank examiners rather than delegate implementation of Tarp to Wall Street firms. The bank examiners would establish how much additional equity capital each bank needs in order to be properly capitalised according to existing capital requirements. If managements could not raise equity from the private sector they could turn to Tarp.
Tarp would invest in preference shares with warrants attached. The preference shares would carry a low coupon (say 5 per cent) so that banks would find it profitable to continue lending, but shareholders would pay a heavy price because they would be diluted by the warrants; they would be given the right, however, to subscribe on Tarp’s terms. The rights would be tradeable and the secretary of the Treasury would be instructed to set the terms so that the rights would have a positive value.
Private investors, including me, are likely to jump at the opportunity. The recapitalised banks would be allowed to increase their leverage, so they would resume lending. Limits on bank leverage could be imposed later, after the economy has recovered. If the funds were used in this way, the recapitalisation of the banking system could be achieved with less than $500bn of public funds.
A revised emergency legislation could also provide more help to homeowners. It could require the Treasury to provide cheap financing for mortgage securities whose terms have been renegotiated, based on the Treasury’s cost of borrowing. Mortgage service companies could be prohibited from charging fees on foreclosures, but they could expect the owners of the securities to provide incentives for renegotiation as Fannie Mae and Freddie Mac are already doing.
Banks deemed to be insolvent would not be eligible for recapitalization by the capital infusion programme, but would be taken over by the Federal Deposit Insurance Corporation. The FDIC would be recapitalised by $200bn as a temporary measure. FDIC, in turn could remove the $100,000 limit on insured deposits. A revision of the emergency legislation along these lines would be more equitable, have a better chance of success, and cost taxpayers less in the long run.
The writer is chairman of Soros Fund Management
This pig is getting burned in the market.
Now I understand two things - this is why Paulson demanded $700 billion without questions, and this is why Kerry and Clinton are out of line and bringing this to the Senate floor for a vote tomorrow night.
I think Soros made most of his money playing games with currency rates. I don’t know how exposed he is but I do know the euro is currently falling against the dollar. Chances are high he is getting burned.
The firms need to be recapitalized and Soros is not the only one who’s thinking this. Wynn expressed similar thoughts on H&C.
Communism ABC
Plan A
1 Weaken the Banks by by poisoning the Loan market.
2 Destroy their capital base by Short Selling.
3 Nationalise the wreckage.
Plan B
1 Drive up commodity prices with your Bank financed Hedge Funds.
2 When the Banks pile in to the Commodities Market, Destroy the Banks capital base by Short Selling.
3 Nationalise the wreckage.
Extremely.
I’ve had my suspicions that Soros is at least partially behind this “economic meltdown” so close to the elections... Remember, this is the guy who nearly took down the Bank of England.
Talk about asking a crocodile for a ride across the river...
Mark
Uh oh....
My suggestion: Let the gov offer to buy suffering financial houses distressed assets at ten cents on the dollar. If the gov doesn’t get any a minimum value of these assets is determined. Two weeks later offer 20 cents. Eventually stop at 50 cents. That ought to put the needed capital back into the system without making millionaires of the unsuccessful gamblers out of taxpayers’ pocket books.
Oh, communism. That’s the globalist anwser.
Is it a surprise that Gorbechev has gone back to Russia to start a ‘new’ political party there?
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