Just in case there was any speculation that American-style communism as any different from Russian-style capitalism, any concerns that the Bernanke put has now gone airborne can be put to rest. As the BBC reports, "Russia's fifth largest bank, Bank of Moscow, has been given the biggest bail-out in Russian history." The hilarity ensues: the $14bn rescue came after another bank, VTB, gained control through a
hostile bid, only to uncover bad loans valued at $9bn - a third of the
bank's assets. So let's get this straight: VTB bid a premium to the equity price only to find out that not only was the entire market cap worth nothing, but that the purchase could have been completed by buying up Bank of Moscow's bonds at 66% cents on the dollar, promptly followed by a debt for equity swap, in which the bulk of the debt could have been equitized, and the resulting company could have been a lean mean lending machine, without a single taxpayer cent spent. Instead, Russia took the American way out, and pretended assets are worth something. Under the rescue deal, the Russian central bank will provide a 295bn
rouble ($10.6bn) 10-year loan at a negligible interest rate to Bank of
Moscow. But that's not all:
Bank of Moscow's former head, Andrei Borodin, has fled the country, and a warrant has been issued for his arrest. And to think that only a week ago the head of the Afghanistan Central Bank Fitrat, who "obviously" is absolutely innocent of all allegations he stole hundreds of millions from Bank of Kabul, escaped to the US. And to keep some illusion as to which countries are now final destinations to exiled global kleptocrats, Borodin has decided to run away to London, until such time as he takes over some Goldman Sachs M&A banker in the New York office. And how you know how capitalism works under central planning.
More from the BBC:
The bank was used by ex-Moscow Mayor Yuri Luzhkov to fund property projects.
Mr Luzhkov was sacked by Russian President Dmitry Medvedev last year.
In a statement issued in London, Mr Borodin said he was shocked at the size of the bail-out, and claimed that VTB's takeover of the bank was politically motivated.
VTB, for its part, accused Bank of Moscow of committing "fraudulent lending" under Mr Borodin's control, while Russian Finance Minister Alexei Kudrin has called for a criminal investigation.
Under the rescue deal, the Russian central bank will provide a 295bn rouble ($10.6bn) 10-year loan at a negligible interest rate to Bank of Moscow.
Meanwhile, VTB will invest a further 100bn roubles to recapitalise the bank - taking its ownership share from 46% to 75%, enough to qualify for state aid.
VTB, Russia's second-biggest lender, had itself to be rescued by the Russian state to the tune of $6.4bn during the financial crisis.