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Billionaire Says Acute Phase Of Economic Woe Is 'Behind Us'

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Bloomberg News

Published: May 8, 2008

Billionaire investor George Soros said the "acute phase" of the financial crisis is "largely behind us" even as the U.S. economy is only now starting to feel the effect.

The damage done to the global financial system "has to affect, in my opinion, the real economy," Soros, 77, said in a question-and-answer session in Washington on Wednesday. "The effect of that is only beginning to be felt. There is a certain time lag," he said.

Just as housing prices "overshot on the upside," they will overshoot on the way down, Soros said. The United States is in the "very beginning of an uptrend" in foreclosures, he said at an event hosted by the Council on Foreign Relations.

The world's biggest banks and securities firms have reported credit losses and write-downs of about $319 billion after the collapse of the U.S. subprime mortgage market, according to Bloomberg data.

Sovereign wealth funds have been a "positive factor" in stabilizing U.S. financial companies, Soros said. Certain "standards" need to be set for the funds because they could come under political influence, he said.

The funds, owned and controlled by foreign governments, have bought stakes in financial institutions including Citigroup, Merrill Lynch & Co., UBS AG and Morgan Stanley, after the banks suffered losses on securities linked to subprime mortgages.

The funds' assets may increase fourfold to $12 trillion by 2015, according to Morgan Stanley estimates.

U.S. stocks are in "a bear-market rally," Soros said. The Dow Jones industrial average has risen 10 percent since March 10.

Last year, Soros returned to a more active role in managing the $17 billion Quantum Endowment Fund, whose profits pay for his philanthropic projects, because of concerns about market declines that started with rising subprime-mortgage defaults.

Soros earned an estimated $2.9 billion last year, according to Institutional Investor's Alpha Magazine.

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