Obama fails to impress Soros

exclusive Financial legend George Soros, one of key backers of the Barack Obama presidential campaign, has expressed his disappointment in the year-old US administration.

Soros (right) , who appeared incisive and sharp at 79, told Malaysiakini that he was let down by Obama’s unwillingness to hold previous president George W Bush accountable for his “war crimes”.

He said he had helped bankroll Obama’s 2008 presidential campaign because “there was a need to disassociate America from the Bush administration”.

“But he (Obama) failed to deliver because he wanted to be the great uniter, and he did not want to hold the previous administration responsible and accountable for its excesses.”

The controversial currency speculator and philanthropist was in Hong Kong early this month to speak at the Hong Kong University and to attend a meeting of his foundation, the Open Society Institute.

In a 20-minute interview at a Hong Kong hotel, he said that he disagrees with Obama’s handling of the financial crisis, describing the new president’s approach as no different from that of the Bush administration.

The billionaire argued that any scheme for bank recapitalisation should be system-wide and compulsory, not haphazard and voluntary in nature.

Soros, who was wearing a white cardigan, revisited one of his favourite topics - the need to regulate the global financial system. He conceded this is a project which he may not be able to accomplish.

The Hungarian-born financier is ranked 29th world’s richest persons by Forbes magazine, with a net worth estimated at US$13 billion.

Excepts of the interview follow.

Malaysiakini: You have supported Obama’s campaign. It has been a year and the new administration appears to be floundering. Are you disappointed in Obama?

Soros: Yes, I’m disappointed. I supported Obama because I felt there is a need for discontinuity from the Bush administration - America went very far wrong (with Bush) and there was a need to disassociate America from the Bush administration.

And that is why I supported Obama (left) . And the fact that he was elected - being a black man - was a clear victory for this discontinuity.

But he failed to deliver because he wanted to be the great uniter, and he did not want to hold the previous administration responsible and accountable for its excesses.

All of us are paying a heavy price for that policy.

What are the policies you’re most disappointed with?

Two major areas. One, is the way the financial crisis is being handled, because he (Obama) effectively continued the approach by the Bush administration. I think that was a wrong approach. He should have recapitalised the banks on a compulsory basis.

Instead of that, he provided protection to the management and shareholders of the subordinated debts and provided hidden subsidies for the banks to earn their way out of the hole.

That turned out to be reasonably effective economically - in the sense that the economy was stablised and the collapse was prevented - but it turned out to be very unjust and politically unacceptable.

Obama felt that what the Republicans called ‘nationalising the banks’ was unAmerican, so that would not be advisable politically. As it is, providing hidden subsidies for the banks - well, not so hidden anyway - and not doing enough for the other segments of the population turned out to be politically even less acceptable.

You mentioned two areas. What’s the other area of disappointment?

The other area is the war crimes of the Bush administration, which was left uncorrected.

You have just finished writing a book (‘The Credit Crisis of 2008 and What it Means’). What’s your next project?

I have many projects. I have now summed up my philosophy and my conceptual framework in a series of lectures, which are now published. And I have a few other projects which I will not be able to accomplish because they are too big.

I’m very concerned with learning the lessons of the financial crisis and developing a new financial global order to preserve the financial markets. Globalisation was built under the false premises that you don’t have to regulate it. And deregulation can be infectious.

Once the United States and United Kingdom started it, everyone will have to join. Otherwise, capital would flee. Therefore, countries have to compete to attract capital by deregulating, so it was infectious. It was a very successful ‘disease’.

And global (financial) regulation is the opposite. But nobody can ‘catch it’.

You cannot ‘catch it’ unless US and UK adopt it.

Yes, it’s true. If it is accepted by the G20, it can be done. It is a big question whether G20 can agree because regulation is based on national sovereignty. Each sovereign nation has its own national interest and there would need to be a grand bargain or a new Bretton Woods to bring about compromises. Each nation will be have to sacrifice something to come to a common ground.

Without it, globalisation will gradually disintegrate because deregulation will have to be directed at protecting against each country’s regulatory arbitrage as capital would want to escape. That will lead to a break-up of globalisation, which I think is the most likely outcome.

The deterioration in the US-Chinese relations is moving in that direction. That is very disturbing. It’s quite recent, (and) it’s gathering momentum. It’s like a snowball - the further it goes, the bigger it becomes.

You were in Davos (for the World Economic Forum). Are people listening to you on the need for global financial regulation?

People are listening to me, but they don’t necessary follow my advice. (laughs)

 

Part 2: Soros on Dr Mahathir Mohamad