[Marxism] George Soros: "I'm having a very good crisis"--Hungary less so

[Louis Proyect]

http://www.dailymail.co.uk/news/worldnews/article-1164771/Im-having-good-crisis-says-hedge-fund-manager-1billion-world-plunged-recession.html
'I'm having a very good crisis,' says Soros as hedge fund managers make 
billions off recession

By Mail Foreign Service

George Soros said the current economic crisis has been the culmination 
of his life's work

A hedge fund manager who predicted the global credit crunch has said the 
financial crisis has been 'stimulating' and the culmination of his 
life's work.

George Soros, who predicted the global financial crisis twice before, 
was one of the few people to anticipate and prepare for the current 
economic collapse.

Mr Soros said his prediction meant he was better able to brace his 
Quantum investment fund against the gloabal storm.

But other investors failed to take notice of his prediction and his 
decision to come out of retirement in 2007 to manage the fund made him 
$US2.9 billion.

And while the financial crisis continued to deepen across the globe, the 
78-year-old still managed to make $1.1 billion last year.

'It is, in a way, the culminating point of my life’s work,' he told 
national newspaper The Australian.

Soros is one of 25, top hedge fund managers from across Wall Street who 
have defied the credit crunch crisis to reap a total of $11.6billion 
(£7.9bn) last year.

---

The Guardian (London)
January 21, 1994

INSIDE STORY: THE SPECULATOR;
Three years ago he was just another Wall Street drone. He amassed 
fortune but little fame. Then George Soros began to invest in Eastern 
Europe, gambling on people instead of money. Today, the man whose 
currency dealing forced Britain out of the EMS, holds uncanny sway over 
22 countries. Michael Lewis joined him on a whirlwiind trip round the 
Soros Empire

By MICHAEL LEWIS

(clip)

Soros had boyhood friends in Hungary put him in touch with Hungary's 
leading dissidents: Istvan Rev, Miklos Haraszti, the coincidentally 
named Janos Kis. Separately, Soros befriended a woman named Annette 
Laborey, who since 1974 had been running from Paris an underground 
network of nonconformists from Eastern Europe. "In those days," recalled 
Laborey, seated beside me on Soros's jet, "the only capital was the 
network of confidence and trust. George came to me and said, 'How much 
do you need?' I said, '$ 10,000 would be really helpful.' He looked at 
me and he said, 'Annette, you must think larger.' " And for the next few 
years she did, funnelling Soros's (anonymous) money into her network.

IN 1984 Soros opened his first office, in Budapest, and began all manner 
of subversive activities for which he is temperamentally very 
well-equipped. "I started by trying to create small cracks in the 
monolithic structure which goes under the name of communism, in the 
belief that in a rigid structure even a small crack can have a 
devastating effect," he wrote in Opening The Soviet System. "As the 
cracks grew, so did my efforts until they came to take up most of my time."

Says Liz Lorant, who worked with Soros from the start: "It was the 
excitement of what we got away with [that is irreplaceable]. We got away 
with murder. [For example] at that time Xerox machines were under lock 
and key. That was the way it was. In Romania you had to register a 
typewriter with the police. Well, we just flooded the whole damn country 
with Xerox machines so that the rules became meaningless." In short, by 
the time the dust settled over the Berlin Wall - boom! bust! - Soros had 
accumulated a highly-charged portfolio of gratitude. The Great White 
Gods of Eastern Europe - Havel, Michnik, Kis, Haraszti - were all in his 
debt. So were all sorts of lesser-known, highly motivated people wending 
their way to high political office.

---

http://news.id.msn.com/business/article.aspx?cp-documentid=2954977
Record fine for Soros Fund over Hungarian transactions

Hungary's financial supervisory watchdog announced Friday it had slapped 
a 1.6-million-euro fine on an investment fund founded by US billionaire 
George Soros, for manipulating the market.

The PSzAF said it had fined Soros Fund Management LLC for transactions 
on the Budapest stock exchange on October 9 that led to a "significant 
loss in value" of Hungarian OTP bank stocks, which fell in days from 
4,000 forint (13.2 euros, 17.86 dollars) to 2,500 forint.

The PSzAF "is imposing a 489-million-forint fine on Soros Fund 
Management LLC... for violating the rules regarding the illegal 
manipulation of financial markets," the supervisory authority said in a 
statement on its Internet site.

The Soros Fund has 30 days to pay this record fine.

The PSzAF said the fund started putting OTP shares up for sale at 4:27 
pm on October 9, just minutes before closing.

"The timing, the number and the effects of these transactions on the 
market point without any doubt to a an illegal market manipulation," it 
added.

OTP, Hungary's biggest bank, was already hit hard by the financial 
crisis, like many other banks, but then saw its share value crumble in a 
few days after October 9.

In a statement Friday, Hungarian-born Soros responded he had been 
informed of the fine but insisted that he was not involved in the 
transactions.

"I no longer control the Soros Fund Management's operations, I retired 
last year and now only oversee the transactions to do with my private 
account," he said in the statement, published by Hungarian news agency MTI.

"Soros Fund Management is cooperating with the Hungarian authorities and 
has also launched an internal investigation" into the illegal 
transactions, he noted.

He added he was "deeply sorry the Soros Fund Management had carried out 
such a transaction."

---

NY Times, April 2, 2009
Politics Add to Economic Turmoil in Hungary
By LANDON THOMAS Jr.

BUDAPEST — The streets of London seethed with protests as the Group of 
20 nations met, but this capital was arguably more unsettled.

Days before the leaders of the Group of 20 gathered to make decisions — 
or avoid them — that would directly affect Hungary, Sandor Csanyi, 
chairman of OTP, the country’s largest bank, could not conceal the 
stress, despite putting on a brave face.

Mr. Csanyi’s puffy red eyes showed the toll of the last seven months: 
the near default of Hungary on its foreign debt, the 90 percent plunge 
in his bank’s stock price as short sellers took aim at OTP, and, most 
recently, the surprise resignation of Hungary’s prime minister, which 
has raised questions about the government’s ability to carry out crucial 
economic reforms.

“Hungary is not Iceland,” he said, drinking a glass of red wine as the 
Danube rolled by a riverside restaurant here. “And OTP is not Citibank 
or RBS.”

But OTP may be more similar to its western peers than Mr. Csanyi cares 
to admit. Short-sellers have laid siege to the bank, calculating that it 
has more sour loans on its books than it is willing to admit and that 
its cash cushion may prove insufficient.

Like Hungary itself, which thought it could borrow its way to prosperity 
in a post-cold war economy that seemed boundless, OTP relied on cheaply 
obtained foreign capital to finance its growth — a practice followed by 
many of its peers in Eastern Europe.

But when the nation’s currency, the forint, collapsed last year, the 
foreign-denominated loans soared in value, making it extremely hard for 
domestic borrowers to repay their loans as the economy shrank.

This week, the bank received a $1.8 billion government loan backed by 
the International Monetary Fund in return for a commitment to increase 
domestic lending.

As for Hungary, the $25 billion agreement it signed with the monetary 
fund last year has put it in an awful policy vise. Mandated to squeeze 
its budget deficit below 3 percent of gross domestic product, the 
government is in no position to stimulate an economy estimated to sink 
by as much as 6 percent this year.

There is no painless path to recovery.

“Hungary has an uphill struggle, but we know that,” Gordon Bajnai, the 
economy minister, said in an interview in late March. “We need a 
reform-minded government.”

On Monday, Prime Minister Ferenc Gyurcsany, the former Communist who has 
led the country since 2004, appointed Mr. Bajnai, a 41-year-old former 
businessman, to lead that effort as his successor.

But furious opposition from Hungary’s right wing — which has called for 
elections — may limit the scope of his ambitions.

Lajos Bokros, a former finance minister, says that the alternative to 
not meeting the monetary fund’s conditions is bankruptcy. He worries 
that the forint will fall even further amid the political uncertainty — 
a concern underscored by downgrades of Hungary’s credit rating by 
Standard & Poor’s and Moody’s this week.

“Hungary is falling behind Europe,” he said. “This does not create much 
room for optimism.”

It is popular here to explain the acrimonious state of Hungarian 
politics as a consequence of an immature democracy still torn by a long 
dispute between former Communists and their bitter enemies on the right.

But Peter Muller, a well-known playwright, said the problem was societal 
in post-Communist Hungary. “We had daydreams of capitalism during 
communism,” he said. “But then becoming rich became a religion.”

Mr. Csanyi, 58, is certainly rich but he wears his wealth in a 
rough-hewn manner and is happiest when hunting wild boar in the 
countryside. Born poor in a small village southeast of Budapest, he 
spent years working in Hungary’s finance ministry before taking over OTP 
in 1992 when the bank was privatized.

Since then, he has overseen an ambitious expansion in central Europe, 
buying banks in Serbia, Bulgaria, Russia and Ukraine.

When foreigners withdrew their capital in a rush last year, OTP’s stock 
collapsed, as short-sellers saw it as a proxy for central Europe’s 
financial maelstrom.

Among the most persistent was George Soros, the Hungarian-born 
financier. His fund was fined $2 million by Hungarian regulators last 
week for having manipulated OTP’s stock price.

Mr. Csanyi’s response has been unconventional to say the least: OTP has 
spent $350 million buying back its stock in a bid to raise confidence in 
the bank. “I think now they are afraid,” he said, referring to 
short-sellers.

Mr. Soros — who once tried to buy OTP — has apologized, but it is by no 
means clear that others who have shorted OTP in the past will turn tail 
now that the bank has become a buyer. Instead, with the bank’s loan book 
under pressure, Mr. Csanyi’s decision to deploy precious capital in such 
a way has raised as many questions as it has answered.

Two days after Mr. Gyurcsany’s resignation, Mr. Csanyi stood behind his 
desk in his office, his eyes fixed on a computer screen. OTP’s stock had 
had a strong opening for a change, despite the political news.

With a grunt of satisfaction, he said, “1,800 forints — that is O.K.” 
But it was still a far cry from its high of 10,900.

“Our loan portfolio is good,” he added. “There is no reason the stock 
price is so low.”

All the same, many investors have doubts. Morgan Stanley, in a recent 
research note, forecast that OTP’s nonperforming loans would reach 15 
percent in the next two years and put a big dent in profits. OTP 
executives accept that nonperforming loans are on the rise, but they 
insist that the bank’s 15 percent capital cushion and an International 
Monetary Fund reserve fund provide a sufficient safety net.

OTP is also negotiating a subordinated loan from the European Bank for 
Reconstruction and Development, a multilateral institution with a 
mandate to aid eastern Europe. That process has been delayed by concerns 
that the deepening recession in Hungary would increase OTP’s burden of 
nonperforming loans.

But the cash is likely to come through. As the country’s largest bank 
and one of the most active in central Europe, OTP — like Citigroup and 
Royal Bank of Scotland, and indeed Hungary itself — is just too big to fail.

Unfortunately, there may be no such reprieve for its customers.

In a small walk-up apartment on the outskirts of Budapest, George 
Ivanyi, a founder of the Association of Bank Loan Victims, does his best 
to cope with an unceasing flow of Hungarians who have come to seek 
advice because they can no longer pay their mortgages after the forint’s 
collapse. Volunteer law students sip Red Bull while they counsel 
couples, and amid the buzz of activity a perpetually ringing phone goes 
unanswered.

“I feel the desperation of the people,” Mr. Ivanyi said. “The banks are 
responsible — but so is the government. They should not have approved 
these loans.”

One woman, he recounts, was so overwhelmed when the monthly mortgage 
bill on her Japanese yen-denominated loan from OTP suddenly soared 50 
percent that she ingested a dose of rat poison and narrowly escaped death.

OTP executives say they are doing all they can to help customers repay 
their debts, and the association says OTP has been cooperative in 
working to devise solutions.

With volunteers too busy to answer the phone, many of those looking for 
help come in person — like Istvan Rakitovszky, 46, a construction worker 
who was laid off last fall and can no longer pay his Swiss 
franc-denominated loan from Raiffeisen Bank, a large Austrian-based bank.

He and his wife bought a small apartment two years ago, but they can no 
longer keep up the payments. Last week they received a letter from a 
collection agency saying their house would be repossessed. “I am 
afraid,” said Mr. Rakitovszky, his face gaunt, his clothes shabby, his 
eyes far away. “We have two kids. Where will we live?”