How to Capitalize the Banks and Save Finance

The US quickly approved devoting at least $700 billion to rescue the nation’s financial system. The steps for recapitalizing banks must be well structured and highly transparent, suggests financier and philanthropist George Soros in the Financial Times. Soros offers specific recommendations: ordering bank supervisors to estimate how much capital is needed to meet required levels and reveal plans for raising capital or accepting capital from the Treasury in exchange for convertible preferred shares; temporarily reducing capitalization levels for US banks until they meet required levels; reforming mortgage programs while reducing the number of foreclosures. Soros warns that time is of the essence. “The authorities have lost control of the situation because they were constantly lagging behind events. By the time they acted, measures that could have stabilised markets were ineffective. Only by promptly announcing a comprehensive set of measures and executing them vigorously can the situation be brought under control.” – YaleGlobal