Sept. 19 (Bloomberg) -- John Bogle, who created the $106 billion Vanguard 500 Index Fund in 1976, said the U.S. government appears ``punch drunk'' given its proposals to rescue the financial system.

``We're playing a game of casino capitalism, interfering with the way the market is working,'' Bogle, 79, said in a telephone interview today from Valley Forge, Pennsylvania. ``The government seems punch drunk. It doesn't seem systematic.''

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed removing troubled assets from banks' balance sheets last night, while the Securities and Exchange Commission temporarily banned short sales of financial firms. The plans followed the government takeover this week of American International Group Inc., the biggest U.S. insurer, and its bailout of Fannie Mae and Freddie Mac, the largest mortgage financiers, two weeks ago.

The Standard & Poor's 500 Index rallied 4 percent today after yesterday's 4.3 percent rebound from the lowest level in three years. The gains helped send the MSCI World Index of shares in 23 developed nations to the steepest two-day surge since records begin in 1970.

``I'm obviously in the minority,'' Bogle said.

Byron Wien, the 75-year-old chief investment strategist at hedge fund Pequot Capital Management Inc., said policy makers are taking the correct approach.

Wien Disagrees

``The most important thing that Henry Paulson and the federal government could do is to keep the economy from slipping into a deep recession,'' Wien, formerly an investment strategist at New York-based Morgan Stanley, said during a Bloomberg Television interview from Paris. ``The next up is to restore stability in the financial markets.''

The U.S. stock market gained or lost more than $500 billion in value on four of the past five days, according to data compiled by Bloomberg.

``Believe me, the value of American business doesn't change that much in a day,'' said Bogle, named one of the industry's four ``Giants of the 20th Century'' by Fortune magazine in 1999.

Bogle, who retired from Vanguard Group Inc. in 1999, said he hasn't changed his personal asset-allocation target -- 35 percent in stocks and 65 percent in bonds -- since 2000. Because of price fluctuations, he currently has about 30 percent in stocks and 70 percent in bonds.

The S&P 500 jumped 6.7 percent from the low to its high yesterday, the biggest intraday swing since July 2002, according to Bloomberg data.

``We're in the most speculative market I've seen,'' said Bogle, who was born five months before the stock-market crash of 1929. ``We seem to be in the depths of despair one moment, and the heights of optimism the next.''

To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net.

Last Updated: September 19, 2008 16:33 EDT