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Russia Discovers American-Style "Capitalism", Completes Record Bailout Of Fifth Largest Bank

Tyler Durden's picture





 

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.

h/t Paul

 


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Sat, 07/02/2011 - 20:41 | Link to Comment bugs_
bugs_'s picture

Mr. President we cannot allow a moral hazard gap!!

Sun, 07/03/2011 - 06:24 | Link to Comment malikai
malikai's picture

Not so fast. This guy is going to have to spend a lot of that loot to keep the mob guys off his back.

And if I were him, I wouldn't eat sushi ever again, either.

Sun, 07/03/2011 - 06:55 | Link to Comment Gully Foyle
Gully Foyle's picture

In Russia banks loan you

Sun, 07/03/2011 - 11:02 | Link to Comment snowball777
snowball777's picture

I will bury YOU(re bad loans with another bad loan).

Sat, 07/02/2011 - 20:46 | Link to Comment km4
km4's picture

excellent corrupt to the core symmetry

Sat, 07/02/2011 - 20:53 | Link to Comment RobotTrader
RobotTrader's picture

That story is nothing short of hilarious.

More proof that the "Bernanke" model of bailouts, monetizations, stimulizations, extend and pretend, etc. is now the envy of central banks worldwide, and will be studied for the next 75 years in the world's top business schools as one of the greatest financial miracles of all time.

Sat, 07/02/2011 - 21:04 | Link to Comment Rynak
Rynak's picture

Yup, a miracle similiar to genocide..... i mean, both are quite "impressive", when seen from anyone who isn't used to this.

But i guess any publicity is good publicity, mmh?

Sat, 07/02/2011 - 23:08 | Link to Comment traderjoe
traderjoe's picture

You've become such a mockery. 

Posts like these aren't even funny and make far too much light of the death and destruction perpetrated in the name of our central banking/cartel planning. Some day, I hope Karma whips you in the ass.  

Sat, 07/02/2011 - 23:34 | Link to Comment Popo
Popo's picture

Please familiarize yourself with the following concept:

http://en.wikipedia.org/wiki/Gallows_humor

Sun, 07/03/2011 - 00:22 | Link to Comment dwdollar
dwdollar's picture

This model will work until it doesn't, but I doubt it will last 75 years.  That's 3-4 generations.  Each one will be closer to poverty than the last.  A lot can happen in that time.

Sun, 07/03/2011 - 06:04 | Link to Comment Cassandra Syndrome
Cassandra Syndrome's picture

The artificially low interest rates of the Central Banks in the 1920s were studied by Mises and Hayek who warned off a depression in the 1930s. They criticised the government intervention of the early 30s and the relevant bailouts then and warned of prolonging the depression leading to war.

So we don't need future ivory towered drones studying this retrospectively as a new school of economics. Its happened many times before in history. The Venetian bank collapse of the 1340s was similar after the UK defaulted, collapsing the global financial system then over a number of years. What happened after that?

Oh yeah plagues, and I mean deadly real ones, not the virtual types like you are on this website.

Mon, 07/04/2011 - 06:07 | Link to Comment Ghordius
Ghordius's picture

+1

Sun, 07/03/2011 - 09:08 | Link to Comment oogs66
oogs66's picture

the world hasn't gone 6 months without needing another form of bailout...let's wait and see if the problem is actually fixed or he is just making a potential collapse that much worse before passing judgement on the 'miracle' he has created

Sun, 07/03/2011 - 13:05 | Link to Comment Blano
Blano's picture

Jesus Jenny people where have all your sarcasm meters gone???

Tyler needs to add a "flag as sarcasm" spot looks like.

Sat, 07/02/2011 - 20:58 | Link to Comment Reese Bobby
Reese Bobby's picture

$10.6B?  They call that a bail-out?  Odd-lotters...

Sat, 07/02/2011 - 21:07 | Link to Comment Rynak
Rynak's picture

We non-americans.... despite of in the past trying really hard to close in on them, just can't match their level of crapocracy.... we always lag behind them :-( It's why we created the EMU.

Sat, 07/02/2011 - 21:22 | Link to Comment dark pools of soros
dark pools of soros's picture

alotta rubles, no?

Sun, 07/03/2011 - 13:06 | Link to Comment Blano
Blano's picture

That's barely a weekend bender in Washington nowadays.

Sat, 07/02/2011 - 21:18 | Link to Comment buzzsaw99
buzzsaw99's picture

pathetically small. gollum steals more than that every quarter.

Sun, 07/03/2011 - 01:58 | Link to Comment boiltherich
boiltherich's picture

The army misplaced more than that in Iraq.

Sat, 07/02/2011 - 21:18 | Link to Comment Downtoolong
Downtoolong's picture

Someone at Goldman Sachs should be fired for sleeping on the job and missing an opportunity for a deal here. This was nothing that the right OTC currency and interest rate derivative couldn’t fix.  

Sat, 07/02/2011 - 21:19 | Link to Comment JW n FL
JW n FL's picture

 

Exxon oil spills in Yellowstone River, forces evacuations

Spill stretches over dozens of miles; not sure what caused pipeline break

http://www.msnbc.msn.com/id/43619388/ns/us_news-environment/

 

 

  Heavy Hitters(1 result)

  Lobbying Client(3 results)

  PACs(1 result)

  Top Contributor to Member(287 results)

Hide All

  Top Contributor to Candidate(64 results)

Hide All

  Affiliate of Heavy Hitter(16 results)

Hide All

http://www.opensecrets.org/usearch/index.php?q=exxon&cx=010677907462955562473%3Anlldkv0jvam&cof=FORID%3A11#831

Sat, 07/02/2011 - 22:07 | Link to Comment jeff montanye
jeff montanye's picture

thank you.  that is a single deep drill into the actual beating heart of why our government is corrupt.

Sat, 07/02/2011 - 22:45 | Link to Comment Protonrick
Protonrick's picture

Maurice Hinchey [D NY] is not on that list.

Good for him!

 

But his omission now begs the question,

"Can a congressperson decline a donation?"

 

Sat, 07/02/2011 - 22:46 | Link to Comment Amish Hacker
Amish Hacker's picture

And remember, folks, always fill up with Exxon, at the sign of the double cross.

Sun, 07/03/2011 - 00:51 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

thx, j-dub.  does it cost extra to give us the lists? 

first, let me advise proton_rick that maurice hinchley (D-ny) may have been left off the list b/c exxon wasn't the Top Contributor to him. 

the link below shows that billings is downstream from yogi in jellystone.  the spill is est to be "no more than" 1,000 barrels (here is the Paste fr the msnbc link, above):An ExxonMobil pipeline that runs under the Yellowstone River near Billings in south-central Montana ruptured and dumped up to 1,000 barrels of oil, fouling the riverbank and forcing water intakes downstream to be closed. (End Paste).

this link:  Yellowstone National Park Rivers, Streams and Creeks ~ Yellowstone Up Close and Personal   shows the v. full yellowstone r.  flowing NE into the mighty (and flooding) missouri r., just X the state line into n. dakota. 

from the link that j-dub in FL gave us, exxon sez (Paste):

Company spokeswoman Pam Malek said the pipe broke about 11:30 p.m. Friday and leaked for about a half-hour.

while the fire chief @ the city of laurel sez (Paste): 

Brent Peters, the fire chief for the city of Laurel about 12 miles east of Billings, said the break in the 12-inch diameter pipe occurred about a mile south of Laurel. Crews shut down the pipeline about half an hour later.

these two reports seem to confirm each other.  however, the company is asserting that the pipe broke @ 11:30 pm, when it was first noticed.  did they notice it right away?  do they really know when the pipe broke?  how?

...to be continued...

Sun, 07/03/2011 - 06:27 | Link to Comment Yen Cross
Yen Cross's picture

 I , Predict Pain!

Sat, 07/02/2011 - 21:39 | Link to Comment angelsand
angelsand's picture

this is all highly predictable, right back to the cold war, citizens believed that the cold war skull duggery of the intelligence agencies [control] were somehow more worthwhile or morally superior to this of Russia's when in reality we are just as willing to sell our souls and belief systems on down the line as the communists are.

See patriot act and tarp.

 

 

Sat, 07/02/2011 - 21:45 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

Fuck Russia. They have never been on the side of anything but tyranny and oppression.

Fuck you, Ivan.

Sat, 07/02/2011 - 22:31 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Russia is one of those places that careful people would NEVER invest in.  They will NEVER get any of my money.

Sun, 07/03/2011 - 05:08 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Hey DCRB. Good blogging.

On Topic though, are you saying that the US is a better place to invest than the USSR?

At least there you know what you get.....bribery, thuggery, a little mafia, a Gaz, perhaps even a Prom.

In the US.... all velvet and sweetness and the famous sales one-liner that always got me.... the guy leans in and says, "Look, I'm going to be up-front with you". I'd alsways ask them, why, is that a special behaviour for me? Are you usually lying?

 

No sir, all the same. Invest if you know your investee. Else, take your money and run.

Hey, anyone want to invest in India? It WILL save your ass and your wealth. Think about it. ;-)

ORI

http://aadivaahan.wordpress.com/2011/06/30/desiderata/

Sun, 07/03/2011 - 06:51 | Link to Comment ZeroPower
ZeroPower's picture

"Look, I'm going to be up-front with you". I'd alsways ask them, why, is that a special behaviour for me? Are you usually lying?

Haha thats a good one!

Salesmen like that are such 'sala chuthias'

Sun, 07/03/2011 - 11:24 | Link to Comment Oh regional Indian
Oh regional Indian's picture

;-)

ORI

Sun, 07/03/2011 - 04:45 | Link to Comment Yen Cross
Yen Cross's picture

       +%200-(200)v_1

Sat, 07/02/2011 - 21:59 | Link to Comment angelsand
angelsand's picture

this brings me to a point I have been cogitating on, while we certainly need more farci linguists, now is not the time to dismantle the russo soviet block of intelligence, in fact I submit to you that since so many of our enemies are still willing to talk with the russians, we should increase our russian surveillance 

Sat, 07/02/2011 - 22:10 | Link to Comment bugs_
bugs_'s picture

I agree we need to increase our russian surveillance particulary Anna Chapman

Sat, 07/02/2011 - 22:07 | Link to Comment angelsand
angelsand's picture

tyranny and oppression, that sounds familiar

while I agree with you on the mass murder point, I disagree with you on that we are so much different, if anything we are more alike, after all we were allies in ww2, in fact after the cold war we were basically butt buddies, as if this country doesn't have blood stains on its hands from tyranny, please

Sat, 07/02/2011 - 22:14 | Link to Comment FinalCollapse
FinalCollapse's picture

I hope Borodin enjoys eating foods with radioactive polonium.

 

Sat, 07/02/2011 - 22:35 | Link to Comment AldousHuxley
AldousHuxley's picture

Russian communists found private ownership of state natural resources are worth a lot of money in the "free" market. Meanwhile American elites are rushing to compete their ego with new global billionares by whipping the enslaved American middle class harder with 60hr/week jobs with no security or benefits.

 

Russian Billionaire 36 Year Old Andrey Melnichenkos $300 Mil Super Mega Jet Yacht

http://www.youtube.com/watch?v=414X1AfJEQw

Sat, 07/02/2011 - 23:37 | Link to Comment JW n FL
JW n FL's picture

he is the second owner and it was not $300m, even after he painted it +++.

Sat, 07/02/2011 - 23:12 | Link to Comment Jack Napier
Jack Napier's picture

The rats are jumping ship. They must smell gunpowder burning.

Sun, 07/03/2011 - 00:04 | Link to Comment Josh Randall
Josh Randall's picture

Monkey See, Monkey Do

Sun, 07/03/2011 - 00:58 | Link to Comment Missiondweller
Missiondweller's picture

One contrast between Russia and the US: Russian bankers fear arrest. Not so much in the US.

Sun, 07/03/2011 - 01:06 | Link to Comment cosmictrainwreck
cosmictrainwreck's picture

Meanwhile, Prime Minister "Vlad, Baby!" Putin remarks about increasing presence in Arctic and how 2012 elections will be "dirty" [translation: Dmitry "little hoss" Medvedev may not be up to the challenge, so Vlad will have to run for Pres. - can you say "6 (12?) more years!"?]

Sun, 07/03/2011 - 01:56 | Link to Comment boiltherich
boiltherich's picture

Seems they have the same fundamental issues we do, no regulation, no oversight, corrupt political processes, and fictional accounting standards.  Tsar Vladimir has as big a ponzi/mafia problem as we do, but he has a short memory, he is popular now, so was Tsar Nicholas until he dragged Russia into a disasterous WW I with his cousin the Kaiser.  Russia has a history of disposing of those rulers they become disenchanted with.  Vote for you one day and kick your ass to the curb when they are fed up, ask Yeltsin.

Sun, 07/03/2011 - 04:51 | Link to Comment Yen Cross
Yen Cross's picture

   I always liked your remarks!   Yen

Sun, 07/03/2011 - 02:17 | Link to Comment n00b tube
n00b tube's picture

You know, I think I'm with SD-1 on this. Why not just bail out the whole fucking world with 10 quadrillion dollars and be done with it. What's that? Don't want to trigger hyper-inflation just yet? I see. The markets need to tank before more funny money gets added to circulation. The sheeple won't panic too much because they'll be told it's "Transitory (a new bedtime story)."

Sun, 07/03/2011 - 02:53 | Link to Comment ebworthen
ebworthen's picture

 

Comrades!

The U.S. has learned from the U.S.S.R. and China; central control with crony capitalism hand-in-hand with banks and judicial systems is most pleasing, except for the peasants.

More Vodka!

 

Sun, 07/03/2011 - 03:34 | Link to Comment Vic Vinegar
Sun, 07/03/2011 - 04:43 | Link to Comment Yen Cross
Yen Cross's picture

 Russia Discovers MEDVEDEV!     Putin take your pellits in umbrellas, And Siberian Tigers and VACATE!            Russia Loves Medvedev!

Sun, 07/03/2011 - 05:02 | Link to Comment magpie
magpie's picture

Say what you want about the Russians, but they sure know how to run a good cop bad cop routine.

Sun, 07/03/2011 - 07:49 | Link to Comment Yen Cross
Yen Cross's picture

 FUCKEN (A) Magpie!        Yen.

 

   Who was the mental Midget that Junked me?  I was simply presenting a scenario.

Sun, 07/03/2011 - 05:41 | Link to Comment WakeyWakey
WakeyWakey's picture

Borodin fled to London because the sheeple there have no idea about money.

http://www.bbc.co.uk/news/business-13998238

More hilarity from the BBC :)

 

 

Sun, 07/03/2011 - 06:30 | Link to Comment DrunkenMonkey
DrunkenMonkey's picture

More like we pray at it's altar ..

Sun, 07/03/2011 - 06:29 | Link to Comment Yen Cross
Yen Cross's picture

   Lets catch these futures charts? OOP's no one has. Must be that CFTC cock block!

Sun, 07/03/2011 - 06:39 | Link to Comment AustrianEconomist
AustrianEconomist's picture

Sun, 07/03/2011 - 06:44 | Link to Comment AustrianEconomist
AustrianEconomist's picture

Bailouts will continue worldwide, because the world's financial system and its underlying economic theories are outdated ever since we left the gold standard in 1971.

Check out the latest from the Capital Research Institute http://capitalresearchinstitute.org/

Sun, 07/03/2011 - 07:52 | Link to Comment Yen Cross
Yen Cross's picture

 Some one on my side of the Earth needs a lesson . Magpie that was not directed @ you.

   If you want to dance I'm game though!   Yen Cross.

Sun, 07/03/2011 - 08:29 | Link to Comment gwar5
gwar5's picture

Too bad fugitive banking is not happening in American banking (yet). Publicly executing bankers worked well for hundreds of years. Seriously. If we know anything by now it's that they're cowards and would be receptive to real deterrence.

"It's not that I want to go back to the past, but I don't mind going back to the past way of facing the future." --- R.R.

Sun, 07/03/2011 - 08:44 | Link to Comment john milton
john milton's picture

For the second time this year, the Danish government has done a remarkable thing: It has shut down a failed bank—and imposed losses on the bank's senior creditors in the process.

http://online.wsj.com/article/SB1000142405270230445060457641740000296592...

prolly passed the stress tests a year ago hah

shame that nordea only suffers 33mil loss over this..

Sun, 07/03/2011 - 12:06 | Link to Comment snowball777
snowball777's picture

A model for the world.

Sun, 07/03/2011 - 08:41 | Link to Comment IMA5U
IMA5U's picture

hmmm...wonder who was shot and who is the next mobster to buy an NBA team?

Sun, 07/03/2011 - 09:35 | Link to Comment Atlantis Consigliore
Atlantis Consigliore's picture

Yuse guys, in moscva, ?

 

you must have watched da movie over here, when a Binkster with govt central prodding bought a mortgage bank, at a premium and 1/3 to 1/2 its loans were worthless, fraud...

 

zubbie doo,   "Countrywide Moscva..."

 

gets bailout stinking and its still keeps tickin...

 

move dem Russian Ribs smear on dat Greece!

Sun, 07/03/2011 - 09:46 | Link to Comment mess nonster
mess nonster's picture

If the Russians would take some bailout money and buy NBA teams, that would be a definite improvement all around.

The last universal bailout was 2000 years ago. Look where that got Jesus.

Sun, 07/03/2011 - 09:48 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

Russians just can never rise above being the universe's poster child for organized crime. Sad, but true.

They would be a kick-ass people if they ever stopped being ruled by criminals.

Sun, 07/03/2011 - 10:06 | Link to Comment Catullus
Catullus's picture

There's a real need for a new word for this type of "capitalism". I know there are a lot of words to describe it, but it doesn't get the point across. I'd call it capitalysm. It looks like capitalism, but it's not. Simple. Tells the story. And we can stop with the quotation marks.

Sun, 07/03/2011 - 10:56 | Link to Comment boiltherich
boiltherich's picture

I like Kleptism.  Simpler to understand and direct to the point, root is greek for theft, and has a whole garden of subwords just waiting to be employed like Ponzocracy, Failocrat, Bribism, Povertites, OK, not so sure about that last. 

One thing about those Russians, they know how to make two or three cities hum with excitement and swim in money even as the rest of the nation consists of dirt fucking poor serfs. 

I will tell you what a lot of their problem is, it is that they have not yet learned how to manipulate PR to their advantage, after all the similarities between us and them are striking yet their masters all look at best to be nouveau riche at the expense of a lot of people who if they look lazy are in fact doing what people everywhere do when they have not been paid in years. 

Sun, 07/03/2011 - 14:21 | Link to Comment Catullus
Catullus's picture

I suppose one could no more centrally a language than an economy.

Kleptism is a good one too.

Sun, 07/03/2011 - 10:56 | Link to Comment RobotTrader
RobotTrader's picture

Maybe the S & P 500 is doing the exact same thing Russian stocks did in 2008.  Huge short squeeze, higher highs, then an utter collapse.

Gotta be quick on your feet and ready for any outcome.

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&instty...

Sun, 07/03/2011 - 11:33 | Link to Comment b_thunder
b_thunder's picture

It's widely known that Putin's clan owns/controls VTB.  It's widely known that Putin/Medvedev have an ongoing conflict with Luzhkov, ex-mayor of Moscow, who used to control/use Bank of Moscow.   It's also widely knwon that either clan wouldn't mind accusing other clan of corruption, fraud and embezzlement, and wouldn't mind grabbing $10b for themselves.

What is the allegations are false?  What if there's no shortfall?  What if ex-KGB folks who run VTB are... well... do what they do best - fabricate evidence and plant fake stories?  Was there a fraud and embezzlement int he BofM?  Sure, like in every Russian bank!  But what's more likely, knowing the ways KGB works in the post-Soviet era, is that Putin & Co found a way to

A) Do a "Straus-Kahn" on Luzhkov - eliminate him from the elections

B) Use the alleged fraud at BofM to transfer $10B from the taxpayers to their own pockets

C) Grab a 5th largest bank

 

Mon, 07/04/2011 - 04:12 | Link to Comment GentlemanBanker
GentlemanBanker's picture

Nothing similar with state bailout of the US banks, as Bank of Moscow's assets were stolen by previous management and what is why the bailout was needed, given that VTB is a state-owned bank, the Russian government made a favor to VTB so VTB could not its spend own money

Mon, 07/04/2011 - 08:48 | Link to Comment jesusonline
jesusonline's picture

Tyler, you got stuff mixed up here. This is indeed more of a clan war, a takeover of a bank which Luzhkov used for money-laundering and funding his own family affairs. This is not an American-Style "Capitalism" bailout, the way you call it.

Hence, you get clueless comments like:

"That story is nothing short of hilarious.

More proof that the "Bernanke" model of bailouts, monetizations, stimulizations, extend and pretend, etc. is now the envy of central banks worldwide, and will be studied for the next 75 years in the world's top business schools as one of the greatest financial miracles of all time".

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