NEW YORK (Reuters) - Bankruptcy expert and investor Wilbur Ross said on Monday that none of the recent actions to stabilize the financial system addressed the root of the problem — helping Americans make their mortgage payments.
Ross told the Reuters Restructuring Summit that a recession could last at least through next year, and said that a large part of what happens to the economy depends on what the new U.S. administration does.
“The reason I think it will take that long is that none of these actions that have just been taken make it any easier for Middle America to meet their mortgage payments — it doesn’t address that whole problem, and that problem is what really caused this to begin with.”
Ross said that in some ways, the financial crisis could be blamed on the American consumer for wanting to improve their standard of living without having the wages and means to do so.
“In one sense, the American consumer is the victim; but on the other hand, the perpetrator of it,” he said.
Ross said it was hard to say whether the $700 billion bailout plan to shore up the battered U.S. financial system was sufficient.
He also said he was concerned by decisions that saw selective institutions bailed out.
“I am disturbed about the slippery slope that we have gotten into, where if you’re stupid but really big the government will bail you out; if you’re stupid but medium-sized, you die. That’s going to encourage very bad behavior by very big institutions. I think that’s a terrible pattern to set.”
He argued that the problems had been “underestimated” from the beginning.
Asked about investment opportunities, Ross said he expected to buy more U.S. municipal bonds, or munis.
He also said that he would like to buy a regional bank and expected to invest in industries that have been hurt by high oil prices, such as refining and possibly more airlines.
Ross, who made his fortune by buying distressed companies in the steel, coal and textile industries and nursing them back to health, has more recently been investing in financial companies such as bond insurer Assured Guaranty Ltd and Option One Mortgage servicing business.
(For summit blog: summitnotebook.reuters.com/)
Reporting by Megan Davies; Editing by Phil Berlowitz