Greece is being rewarded for failing to live up to its commitments and every time they fail to live up to their commitments they get more concessions out of the EU or out of the private sector lenders, says says Wilbur Ross, RL Ross & Co.
joining us now for the next two hours a good friend of theprogram, wilbur ross. great to have you here, wilbur. good morning when it feels a little bit like groundhog day when it relates to greece at least. we have had some news out ofportugal. i don’t know if you think the story is moving. i was reading through some of the notes and you suggest that the way they are approaching some of these bailouts andrestructuring is setting a very bad precedent. why do you say that? i feel that because greece is being rewarded for failing tolive up to its commitments. every time they fail to live up to their commitments they get more concessions out of the eu or out of the private-sector lenders and i think that’s a message that won’t be lost on spain, portugal, italy, whoever comes next. if our on the other side of that trade what’s the alternative? if you’re germany, do you have a choice in i think at the end of the day they make a deal with greece and i don’t think you have thedisorderly disruption. i agree with that. i just think that greece isoutmaneuvering everybody else. outmaneuvering, makes itsound like they are getting a great deal. if you look at the nation they have dealt with some really big set backs. it shrunk by 7% just in the fourth quarter. it certainly has. it will shrink by more if they implement the new programs. but what do you think wouldhappen to it if it just dissolved. if they tried to go back to thedrachma. what happens to the banks. what happens to international trade. what happens to the whole economy. who gets the worse end of the deal if they do leave the euro and go back to the drachma? do you think the greek are the ones who wind up bearing the brunt of the big problems? i think they eventually do because they are a trivial percentage of euro together and in the world. once they make that big movewhatever would happen will happen. i think the european currency is much better equipped and the european economy is much better equipped to handle a greek situation now than they would have been a year ago. it’s good they sort of extended it out. i do in an odd way because the ecb is finally starting to act a little more like the federal reserve. remember their technical mandate is simply fight inflation. do you think it took a year of sort of mental gymnasts? greece and germany if they just dealt with it. it’s europe. professional can kickers. professional can kickers. but also life is — you know we don’t live to work. it’s a beautiful bay. i’m in an olive grove. what would you do? would you go run off to a meeting with pale bureaucrats. europeans used to boost we’re the leisure economy. america is the work economy. we’re the leisure economy. i believe there’s some truth to all this. you got all those desperate, separate economies and no way to do there what we did here. this is the best we could have ever gotten out of them. you think that the best thing might actually to be let greece go because it sets an example for everybody else to get in shape? size of philadelphia without the cream cheese. that’s true. maybe philadelphia doesn’t matter but the question is and i think the question is what happens to portugal and spain. fundamentally it’s an issue of the banks and with the monetary moves that the ecb has been making, the long term loans to the banks, liberalizing collateral, all things that have been put in and his predecessor not willing to put in is a big difference. now you have a lender of last resort where a year ago it wasn’t clear you did. remember they were fumblilng about the efsff and all that. i want to change topics on you for a second. i want to talk about the volcker rule. the comment period ended monday night. we talked to hank paulson yesterday. he said that he didn’t think the volcker rule really mattered meaning the protry tear tradingwas not the problem. if you had to offer comments, not in the form of a letter but maybe somebody is listening. well, i don’t think proprietary trading remotely caused the crisis. that isn’t what did it. with the exception of aig the home mortgage problem wasn’t caused by proprietary trading. it was the reverse. it was people who hedged themselves. do you think the rules are a mistake? i ask that because a number of banks, regulators and a number of letters from just plain old vanilla american corporations submit letters saying the volcker rule may create problems and possibly systemic problems for sovereigns and the like. it’s very likely to for a couple of reasons. those people had been a big source of liquidity in a whole variety of markets. if you don’t have market liquidity you’ll have more volatility. so paul volcker writes a letter in support of the volcker rule and says liquidity is overrated. i’m paraphrasing. the more liquidity you have that can create speculation, that we shouldn’t actually be all in search of more and more liquidity. is he right or wrong. liquidity is like oxygen.it’s overrated except when you run out of it. then you notice itimmediately. then you miss it. do you think we’re approaching all of this regulation in the right way? no. in terms of the banking regulation. you obviously own a bank or two and have owned a lot of banks over the years. it’s very different. we’re in smaller banks which are getting bothered by a lot of the bureaucracy and a lot of the rulemaking president rulemaking.at bank united it’s one fourth of the bank that was sold to capital one and we have four times as many people in compliance as he had. that’s a 16-1 ratio all because of the new rules. talking about compliance there was a story a couple of weeks ago, blackstone, one of the investors tried to pull out because of these transparency rules that go back to the individuals who own the firms including yourself and how much you have to disclose to the federal reserve. how much is that a problem?it’s not a problem for us. we disclosed everything that needed to be disclosed. that particular rule didn’t bother me very much.you probably had conversations with some of your peers though who did bother. there are people who feel differently about it.but to me if you’re in a regulated industry you should have disclosure. i don’t see that’s a big deal.
Einhorn’s FOF Re-positions Portfolio, Makes New Seed Investment In Year Marked By “Speculative Exuberance”
It has not just been rough year for David Einhorn's own fund. Einhorn's Greenlight Masters fund of hedge funds was down 3% net for the first half of 2020, matching the S&P 500's return for those six months. In his August letter to investors, which was reviewed by ValueWalk, the Greenlight Masters team noted that Read More