"James B. Rogers Jr. became an investing phenomenon early in his life, only to retire at 37 and travel the world on a motorcycle — prompting Time magazine to call him the “Indiana Jones of finance.”
These days, he is sounding more like the Cassandra of finance, judging from his bearish comments Thursday about the American banking system.
Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, Mr. Rogers argued that the government is taking a wrong-headed approach to saving the financial system by investing in troubled banks. “Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt,” he said.
Mr. Rogers co-founded the Quantum Fund with George Soros in 1969. More recently, he has taken a special interest in the world of commodities as an author and private investor.
Earlier this week, a report from the Congressional panel overseeing the government’s bailout effort posed a series of questions to the Treasury Department, including one asking whether its rescue strategy — which includes spending hundreds of billions of dollars to buy stakes in financial institutions — was working.
For Mr. Rogers, the answer to that question would seem to be “no”:
“Governments are making mistakes,” he said Thursday. “They’re saying to all the banks, you don’t have to tell us your situation. You can continue to use your balance sheet that is phony […] All these guys are bankrupt, they’re still worrying about their bonuses, they’re still trying to pay their dividends, and the whole system is weakened.”
The basic point he is making is that these banks cannot be trusted to do anything but think about their own best interest. I agree, and that is why the Hybrid TARP Plan cannot work. There are different interests involved, between the government and the banks.
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