The big profits made by some of Wall Street’s leading banks are “hidden gifts” from the state, and taxpayer resentment of such companies is “justified”, George Soros, the fund manager, said in an interview with the Financial Times.
“Those earnings are not the achievement of risk-takers,” Mr Soros said. “These are gifts, hidden gifts, from the government, so I don’t think that those monies should be used to pay bonuses. There’s a resentment which I think is justified.”
Mr Soros, who joins a transatlantic chorus calling for limits on risk, leverage and compensation at big banks, said proprietary traders belong at hedge funds, not at banks, and that the compensation at Wall Street companies should be limited to prevent excessive risk.
“With the too-big-to-fail concept comes a need to regulate the payments that employees receive,” said Mr Soros, who will elaborate on his views in lectures in Budapest next week.
Some bankers have argued that limits on pay would make it difficult for them to retain their most talented risk-takers. Mr Soros agreed and said this would be a good thing.
“That would push the risk-takers who are good at taking risks out of Goldman Sachs into hedge funds, where they actually belong, because hedge funds take risks with their own capital, not with deposits and not with government guarantees,” he said.
Asked if his opinions were influenced by his personal investments, Mr Soros said no and pointed out that he has long advocated more regulation of hedge funds.
Mr Soros, who is probably best known for his bet against the British pound, said the dollar was weak, but that its decline would be limited by its tie to the Chinese renminbi: “As long as the renminbi is tied to the dollar, I don’t see how the decline in the dollar can go too far.
“There is a general lack of confidence in currencies and a move away from currencies into real assets,” he said. “There is a push in gold, there’s a strength in oil and that is a flight from currencies.”
Mr Soros said that he thought the rally in the US stock market would continue for the rest of the year. But he warned that “the hope of a rapid recovery in the US is misplaced”.
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