Soros floats alternative bailout plan with Dems
By Alexander Bolton
Posted: 09/30/08 11:19 PM
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.
Democratic Rep. Jim Moran (Va.) scheduled a meeting Tuesday afternoon with Robert Johnson, a former manager of the Soros Fund Management, to discuss the proposal.
Soros has also contacted Sen. Barack Obama’s (D-Ill.) presidential campaign to share his views on the financial crisis and the best way to solve it.
Soros described the plan he outlined in his concept paper in an opinion editorial that appeared in the Financial Times early Wednesday morning, Greenwich Meridian Time.
“Instead of purchasing troubled assets, the bulk of the funds ought to be used to recapitalize the banking system,” Soros wrote.
“The Treasury secretary would rely on bank examiners rather than delegate implementation of to Wall Street firms,” he wrote in reference to the plan first crafted by Treasury Secretary Henry Paulson. “The bank examiners would establish how much additional equity capital each bank needs in order to be properly capitalized according to existing capital requirements.”
“The recapitalized banks would be allowed to increase their leverage, so they would resume lending,” he wrote.
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The international financier would also like the government to take direct action to shore up the ailing housing market.
“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,” Soros wrote in Wednesday’s commentary .
“A revised emergency legislation could also provide more help to homeowners,” he wrote of a package based on his own proposals. “It could require the Treasury to provide cheap financing for mortgage securities whose terms have been renegotiated, based on Treasury’s cost of borrowing.”
He has also suggested prohibiting mortgage companies from charging fees on foreclosures. Many companies are quick to foreclose because they no longer own the loan itself, which has likely been turned into a security.
Instead, these companies make money by charging delinquent borrowers during the foreclosure process.
Soros has emerged as a harsh critic of the Treasury Department, especially of Paulson’s proposal for the government to buy $700 billion of distressed mortgage-backed
securities to restore the flow of credit in the financial markets.
more:
http://thehill.com/leading-the-news/soros-floats-alternative-bailout-plan-with-dems-2008-09-30.html