'Commissars' to Oversee Bailout Cash

ria-novostiMedvedev, right, shaking hands with Primakov on Tuesday. The president warned banks not to abuse bailout funds.
President Dmitry Medvedev called for the Central Bank to appoint "commissars" to oversee the use of trillions of rubles in liquidity-boosting loans.

The Central Bank's envoys will monitor banks' profit margins from lending the funds to other banks and companies, Medvedev told the Russian Chamber of Commerce and Industry on Tuesday.

Facing its worst economic crisis in a decade, Russia allocated billions of dollars to shore up the banking sector, channeling long-term loans through state-owned bank giants Sberbank and VTB.

Medvedev said a "considerable part" of the government's bailout money had been allocated, "but companies haven't received it." The government must reduce the intermediate steps between a decision to provide money and a loan being made to a specific company, he said.

Since announcing the bailout more than a month ago, a growing chorus of officials have spoken out against the possibility of banks using the bailout funds only to bolster their balance sheets or move funds offshore instead of lending.

Yevgeny Primakov, head of the Russian chamber, said private banks "ceased to be solely commercial" when they accepted state money. "We need to demand that they do what the government and the society require -- demand is the word," he said.

Primakov, who led Russia's government as it emerged from its previous financial crisis 10 years ago, said a "state dictatorship" was required to ensure that tens of billions of dollars flowed through banks to their intended recipients in industry.

"Our biggest concern is that the thrombosis of credit lines and the rise in banks' rates is leading to falling production," he said, adding that the rescue package should be channeled to the real economy.

"This can only be done through a tough state dictatorship over the banks," Primakov said.

Russia recorded its biggest-ever monthly net capital flight in October -- $50 billion -- at least some of which occurred as a result of banks plugging holes caused by the financial crisis.

The president also on Tuesday lashed out against corporate raiders who use their links to corrupt officials to seize businesses illegally, often with the aim of acquiring prime real estate.

"This evil now exists not only in the capital, but in typical provincial cities, and this shows that the disease is already metastasizing," he said, Itar-Tass reported.

"Maybe this doesn't sound completely liberal, but for this kind of thing people need to be locked up."

He added that the government should start clamping down now, all the more so since the country is in the midst of a crisis.

"No one should get rich in a crisis. Some things that might have been forgivable in another situation cannot be overlooked now," he said.

The president also called for changes to the law governing government purchases, calling the level of corruption in this area "colossal."

(AP, Reuters, Bloomberg, MT)