Is George Soros for the good bank/bad bank idea or against it? Reports from Davos this morning suggested that the billionaire financier supported a plan rumoured to be in the works inside the Obama administration to create a so-called bad bank to buy up mispriced mortgage assets from financial institutions. But now CNBC is reporting that Soros disagrees with the plan.
“That (the “bad bank” proposal) will help relieve the situation, but it will not be sufficient to turn it around,” Soros said during a live interview at the Davos economic conference in Switzerland. Instead, Soros said he would create a “good bank” and re-capitalise the good assets.
He admitted his alternative plan is not likely to get support because it too closely approaches nationalization. “The political will to do that is not there,” he said.
We’re not sure we quite understand what Soros is getting at here. Certainly, any government created “bad bank” would help recapitalize the banks by allowing them to trade assets of declining or questionable value for assets whose value is more stabilised. But perhaps Soros thinks this won’t be enough. What do you think?