US financier George Soros warned in a television interview on Tuesday that the turmoil in the financial markets was far from over, with Britain likely to be the economy most badly hit by the crisis.
As Wall Street braced for the potential collapse of insurance giant AIG, the hedge fund pioneer told the BBC that the wisdom of letting Lehman Brothers go to the wall at the weekend would only be revealed with hindsight.
“I’m afraid we are not through it at all — in some ways we are still heading into the storm rather than heading out of it,” he said.
Asked whether the US government should have rescued Lehman investment bank, he said: “If the financial system survives then it was the right thing to do to let them go bust. If there is a meltdown then obviously it wasn’t. Saving the system trumps moral hazard. In the end you do whatever it takes to save the system.”
However, he said the way US Treasury Secretary Henry Paulson was handling the situation was “very reminiscent of the way the central bankers talked in the 1930s,” the time of the Great Depression.
Soros said Britain’s reliance on the financial industry make it especially vulnerable.
“The financial industry is a major segment of the British economy and that’s why I think Britain is more heavily hit by this financial crisis,” he said.
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