Soros fears tax plans but backs Obama calls to break-up banks

"To tax the banks when they are doing everything they can to get out of a hole is the exact opposite of the policy you are trying to pursue," Soros told a meeting on the fringes of the World Economic Forum in Davos.

President Obama has said Wall Street banks should pay up to $117bn (72.3bn) to reimburse taxpayers for the financial bailout.

Mr Soros, the financier who made a fortune betting against the pound in the 1990s, said he was in favour of Obama's other more sweeping reform, which aims to prevent banks from engaging in proprietary trading or investing in hedge funds or private equity funds.

He said the proposals may fall short.

"Some banks will spin off their investment banks and they will be very substantial and they will be too big to fail," Mr Soros said.

But other business leaders warned Western governments that a populist crackdown on the financial industry could limit a fragile recovery from the worst recession since the 1930s.

The 2,500 business leaders and policy makers met at the World Economic Forum in the Swiss ski resort of Davos were also critical of British and French plans to curb top pay and the alleged "culture of greed" blamed for excessive risk-taking.

Surveys produced for the annual conference showed global economic confidence on the rise after deep gloom in 2009 and a cautious return to hiring, especially in emerging markets.

But the spectre of uncoordinated, heavy-handed regulation and government intervention in the economy was the biggest cloud on many business leaders' horizon.

Uncertainties over whether China will rein in its feverish pace of growth and concerns about how Greece will tackle its debt crisis also weighed.

President Obama jolted markets on January 21 with proposals to force commercial banks to cut ties with hedge funds and private equity funds and stop proprietary trading, and to pay back a massive taxpayer bailout.

Barclays president, Bob Diamond, challenged Mr Obama's effort to limit the size of big banks, telling the forum: "If you step back and say large is bad, and we move to narrow banking, the impact of that on banks and on global trade, the global economy, would be very negative.""

Standard Chartered bank chief executive Peter Sands said fragmented regulatory initiatives would "create enormous amounts of complexity".

Not all bankers were critical. The CEO of Italy's biggest retail bank, Corrado Passera, of Intesa Sanpaolo, said it was a good idea to reward banks that did less proprietary trading and lent more to the real economy.

But Jacob Frankel, chairman of JP Morgan Chase International, said there was a danger of "falling into the trap of excessive interventionism, excessive protectionism".

US economist Nouriel Roubini, said he was not concerned about over-regulation but about a return to business as usual.