Treasury Secretary Henry Paulson's plan to inject capital into U.S. banks won't provide them with the liquidity they need and most will fail, said Kenichi Ohmae, president of Business Breakthrough Inc.
"Paulson is on the road to kill all these banks." said Ohmae, nicknamed "Mr. Strategy" during his 23 years as a McKinsey & Co. partner. "They're talking about a $25 billion injection in each of the top banks. That won't do the liquidity magic."
Ohmae called for a $5 trillion "international facility" to be made available to financial institutions. The U.S. should call on overseas governments and their trillions in dollar reserves to help finance this, Ohmae said.
Earlier this week, Paulson said the first $250 billion of a $700 billion rescue would go into the balance sheets of financial firms in exchange for nonvoting, preferred equity.
Banks need 10 to 20 times of their equity to operate, making the injections "peanuts" compared with the potential bad debts, Ohmae said.
Paulson is heading in the direction of creating large "megabanks" as happened in Japan during its financial crisis of the 1990s and early part of this decade when the nation's largest city banks merged to become three — Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. — Ohmae said.
"Don't create three megabanks, because that's an oligopoly, and they don't worry about customers," Ohmae said in an interview on Bloomberg Television. "You are heading in the worst direction."
Ohmae, 65, is the author of management books, including "The Mind of The Strategist," "The Borderless World" and "The End of the Nation State." Business Breakthrough, founded in 1998, provides online management training.