Ask investing icon Jim Rogers about the $700 billion U.S. banking bailout, and he’ll tell you that it’s nothing but “horrible economics.”  And with good reason: Most of the major U.S. banks are already bankrupt.

“Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt,” Rogers said in a recent teleconference at the Reuters Investment Outlook 2009 Summit. “What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent. What’s happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics.”

A long-time China bull, Rogers first made a name for himself with The Quantum Fund, a hedge fund that’s often described as the first real global investment fund, which he and partner George Soros founded in 1970. Over the next decade, Quantum gained 4,200%, while the Standard & Poor’s 500 Index climbed about 50%.

It was after Rogers “retired” in 1980 that the investing masses first really got to see him in action. Rogers traveled the world (several times), and penned such bestsellers as “Investment Biker” and the recently released “A Bull in China.” He also made some historic market calls: Rogers predicted China’s meteoric growth a good decade before it became apparent to everyone else, and he subsequently foretold of the powerful updraft in global commodities prices that’s fueled a year-long bull market in the agriculture, energy and mining sectors.

Rogers’ candor has made him a popular figure with individual investors, meaning his pronouncements are always closely watched. Twice last year Rogers granted exclusive interviews to Money Morning Investment Director Keith Fitz-Gerald. In one of the interviews – carried each time as two-part series in Money Morning – Rogers correctly predicted that the U.S. financial crisis was destined to get much worse before any improvement was visible.

Goldman Sachs Group Inc. (GS) analysts last week estimated that banks worldwide have incurred $850 billion of credit-related losses and write-downs since the global credit crisis began last year.

But Rogers said sound U.S. lenders remain. He said these could include banks that don’t make or hold subprime mortgages, or which have high ratios of deposits to equity – “all the classic old ratios that most banks in America forgot or started ignoring because they were too old-fashioned.”

Many analysts have cited the Sept. 15 bankruptcy filing by Lehman Brothers Holdings Inc. (OTC: LEHMQ) as a trigger for the soon-to-follow cratering of the U.S. stock market and accompanying worsening of the U.S. economy.

But Rogers called that idea “laughable,” noting that banks have been failing for hundreds of years. And yet, he said policymakers aren’t doing enough to prevent another Lehman.

“Governments are making mistakes,” he said. “They’re saying to all the banks, you don’t have to tell us your situation. You can continue to use your balance sheet that is phony ” All these guys are bankrupt, they’re still worrying about their bonuses, they’re still trying to pay their dividends, and the whole system is weakened.”

Jim Rogers: $700 Billion Banking Bailout is ‘Horrible Economics’