Advancing a Free Society

All You Need to Know About Crony Capitalism

Saturday, July 2, 2011

Russian bank regulators and state-controlled bank VTB Group announced a $14 billion loan (at half a percent interest) to take effect after VTB boosts its share of Bank of Moscow to 75%. According to regulators, the bailout of Bank of Moscow was needed because it made more than half of its loans to its own businesses, including to a real-estate company of Elena Baturina, the billionaire wife of the recently fired Moscow mayor. No one outside of a narrow circle knew the bank’s loan portfolio because former Mayor Yuri prevented anyone from asking "unwelcome questions." The results shown to investors and the central bank, according to one banking official, were pure fraud."

In an understatement, a bank analyst stated: "We cannot rule out problems in many banks."

Bank of Moscow’s former head expressed surprise (after fleeing to safety abroad) at the size of the state aid to VTF and cited “political motivation’ as the real reason for the takeover and bailout. After all, he conducted Bank of Moscow business like any other bank.

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