Even Former Marxists Know How To Do Bailouts
First we were mocked by Pravda. Now, if leaked reports are true, our bank bailouts will be further exposed as the morally-destructive giveaways to the banking class that you know them to be. Even the former followers of Trotsky and Marx know how to conduct a bailout; you gain control of failed banks in exchange for government cash. Russia will reportedly demand board seats and veto rights from all aggrieved institutions.
In a few months don't be surprised if you hear that Marx and Castro have embarked on a global-influence tour proposing debt-to-equity conversion for failed bank bondholders. Stranger things.
From the FT:
Russia is looking at a bail-out of its banks that would go further than the emergency action taken by the US, amid growing fears that bad loans could paralyse the country’s economy.
Igor Shuvalov, deputy prime minister, will consider taking stakes in troubled banks when a group of experts on the financial crisis meets on Friday to discuss ways to recapitalise Russia’s banking system, according to a draft proposal seen by the Financial Times.
The proposal, one of several under consideration, would see the government issue OFZ treasury bills, a type of bond, to boost the balance sheets of the biggest banks. In return, the state would receive preferred shares.
Unlike the US bank bail-out, the Russian scheme would see the government take board seats and have veto rights.
Analysts said such a plan would allow banks to declare the true level of their bad loans and, once their balance sheets were cleaned up, enable them to start lending again in 2010.
About $100bn in domestic loans fall due by the end of the year and the central bank has said bank profits would be wiped out if non-performing loans reached 10-12 per cent of the total.
With high interest rates and a dearth of new credit, bankers say they fear non-performing loans could hit as much as 20 per cent of overall credit portfolios by the end of the year.
