While the Senate reportedly prepares to vote on its own version of Treasury Secretary Henry Paulson’s bank bailout package, liberal philanthropist and financial speculator George Soros has come up with his own Wall Street “rescue” package.
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.
Moran compared the proposal to Warren Buffet’s $5 billion investment in the investment firm Goldman Sachs Group in return for preferred stock and warrants to buy common stock at a discount.
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 [the Troubled Asset Relief Program] 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. [emphasis added above]
Moran is wrong to compare the plan to Warren Buffett’s recent transaction, which Buffett did with his own money. Soros wants to use government money. Anyway, here is a link to the Soros op-ed in the Financial Times today.
It should be noted that Soros is a driving force behind the Democracy Alliance and a major donor to Democratic political candidates. Robert Johnson, Soros’s emissary to Capitol Hill, is also a player in the Democracy Alliance, which aims to create a permanent political infrastructure of nonprofits, think tanks, media outlets, leadership schools, and activist groups—a kind of “vast left-wing conspiracy” to compete with the conservative movement.
POST SCRIPT later the same day: Lawmakers gave a mixed reception to the Soros plan, The Hill reports. Here is a summary of Soros’s proposals from the article I just linked to in this Post Script:
Soros has proposed that Congress establish a Financial Reconstruction Corporation with capital of $500 billion to underwrite the recapitalization of the banking system. Under the plan, the corporation would provide equity capital to banks that have run short of funds.
Soros has also proposed mandating the Treasury Department to provide financing for renegotiating the terms of mortgage-backed securities. This would reduce foreclosures by helping homeowners adjust their mortgages to be more affordable.
Soros has also suggested a freeze on fees that mortgage service companies charge during the foreclosure process, which experts have identified as a significant financial incentive for these companies to foreclose on troubled mortgages.