Billionaire investor George Soros on Friday said the just-passed U.S. financial overhaul bill will impose new regulations on the banking system before the banks have recovered sufficiently to cope with new restrictions on their activities.
The banking system still needs to earn its way out of a hole, Soros said at a panel discussion at the Hamptons Institute in East Hampton, New York.
In that sense the bill has come too early. While Soros said of the bill it is good to have it done, he said the new legislation doesn't address the problems in the system.
Turning to financial markets, Soros said the Treasury bond market suggests no inflation and indicates no growth. The benchmark 10-year U.S. Treasury note has been a huge beneficiary in the flight to quality, with its yield falling to 2.93 percent from 3.00 percent on Thursday.
Soros said cutting the stimulus and cutting the unemployment benefits, cutting the aids to states, which are losing tax revenues and therefore have to cut services and employment come at a time when the U.S. economy is fragile.
When the demand comes back, you will see it with bank lending and interest rates beginning to move up. That's the time to cut back -- not now, he said, referring to fiscal stimulus.
Soros joined Elizabeth Warren, professor of law at Harvard University, at the panel discussion on Restoring the Integrity of the U.S. Financial Markets.
On the Greek debt crisis, Soros said Greece's debt has to be restructured in an orderly way.
It's already in the price of the bonds, he said.
But the imposition of a haircut cannot happen until Greece has addressed its primary deficit and restored a primary surplus.
(Reporting by Daniel Burns; Additional reporting by Jennifer Ablan; Editing by Kenneth Barry)