It is amazing to me that despite the terrible performance of the financial markets, Soros still give Obama high marks. Nevertheless, I think his assessment of the situation bears wisdom. His solutions, on the other hand, are more of what has created the crisis. From Bloomberg:
George Soros, the billionaire hedge- fund manager who made money last year while most peers suffered losses, said the four-week rally in U.S. stocks isn’t the start of a bull market because the economy is still shrinking.
“It’s a bear-market rally because we have not yet turned the economy around,” Soros, 78, said in an interview yesterday with Bloomberg Television, referring to the recent rebound in stock prices. “This isn’t a financial crisis like all the other financial crises that we have experienced in our lifetime.”
The Standard & Poor’s 500 Index of largest U.S. companies has climbed 24 percent since March 9 on optimism the worst of the 16-month U.S. recession is over. The economy continues to contract, and there’s a risk the U.S. falls into a depression, Soros said.
‘Zombie’ Banks
Soros said the banking system is “seriously under water” with banks on “life support.”
“They are weighed down by a lot of bad assets, which are still declining in value,” he said in the interview in his New York office. “The amount is difficult to estimate, but I think it’s in the region of maybe a trillion-and-a-half dollars.”
Soros said the change to fair-value accounting rules will keep troubled banks in business, stalling a U.S. recovery.
“This is part of the muddling-through scenario where we are going to keep zombie banks alive,” Soros said. “It’s going to sap the energies of the economy.”
The Financial Accounting Standards Board relaxed so-called mark-to-market rules last week, allowing banks to use “significant” judgment in gauging prices of some investments on their books. While analysts said the measure may reduce writedowns and boost net income, investor advocates and accounting-industry groups said it will help financial institutions hide their true health.
