Reynolds: US needs stronger response to crisis

Putnam Investments chief executive Robert Reynolds called for officials to take more aggressive steps to combat the financial crisis, including a suspension of so-called "mark-to-market" accounting rules and allowing more institutions to fail rather than propping up what he called "zombie companies.''

"We need to end the half-measures, denials, and uncertainty,'' Reynolds said in a speech to the Greater Boston Chamber of Commerce event this morning held at the Boston Harbor Hotel.

The head of the Boston mutual fund firm also said the Obama administration needs to get more focused on the economy.

"Let's get beyond this lemon socialism we've been drifting into,'' Reynolds said.

Reynolds' wide-ranging talk came as Putnam has seen its total assets plunge along with those of other money managers follow sharp market declines. Most his remarks were upbeat, betting that a recovery would come in the US ahead of foreign markets that have seen even greater stock declines and touting values of resilience. He said he couldn't give a specific forecast of when a recovery would begin, saying that "just as nobody foresaw how severe the crisis would be, so the beginning of a real recovery will likely catch us all unawares."

But he also called on the Obama administration and others to be more aggressive in moving to address the economy's problems. Ideas could include expanding the Treasury's program to buy or support troubled bank assets or implementing a system to split banks into ''good'' and ''bad'' divisions.

Also, he called for the suspension in some cases of accounting rules that require companies to carry assets on their books for what they might bring on the current market, which he said creates fire sale prices for many assets unnecessarily.

"Balance sheets are being artificially hit when they shouldn't be,'' he said.

Other financial executives have made similar criticisms of the rules, put in place by accounting organizations to prevent abuses.

Speaking to reporters after his speech, Reynolds also said the government should allow to fail companies that aren't using taxpayer funds effectively.

"Let them go,'' he said when asked about AIG, the giant insurer whose rescue price tag now stands above $170 billion, and troubled firms that have received taxpayer bailouts. "We've pumped so much money into them, to what end? Absent a plan [to] tell us how you're going to get out of this. Not, come back every quarter for more money. That's not a plan."
(By Ross Kerber, Globe staff. File photo of Reynolds: Chitose Suzuki/AP.)