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. Last Updated: 07/27/2016

EDITORIAL: Bank Loans Pour Money Down Drain

Some sort of banking sector must rise from the wreckage of Aug. 17. But this new banking sector should not be secretive, irresponsible, coddled and unsupervised. If it is, then we will again be putting the nation's savings into the hands of reckless financiers who do not respect either the government, the people at large or even their own depositors.

Unfortunately, as Yevgenia Borisova reminds us in a Page One report, that is exactly the sort of sloppy banking sector the government is continuing to cultivate. According to tax authorities, some 17 billion rubles - more than was collected in taxes nationwide last month - remain stuck in commercial banks.

Moreover, managers at some of the most completely crippled banks have reportedly been taking bribes to forge paperwork documenting never-made wire transfer payments to tax authorities.

This is an outrageous practice - but it is not at all surprising, given that the government has been so quick to feed ailing private banks, but so slow, weak and reluctant to insist on knowing how fat state loans are used. The result has long been predictable: Like a spoiled child who feels contempt for intimidated and overly indulgent parents, the banks do not respect the government.

Russia's sickest banks - including nearly all of its biggest before the crash - should have been put under temporary state administration. Only then, when the government could control how the money was spent, would it truly have made sense to float big ruble loans to big indebted banks.

Instead, the government allowed politically connected banks to take easy loans and to use them as they pleased - even as the government took depositor obligations onto itself. That such fat loans have done little to revive the banks is not surprising: Not even the bankers who own them have enough faith in the system to invest in it. Far better to spirit the government largess abroad, or to sink it into other properties bank managers own - like oil and metals companies bought on the cheap through privatizations.

It is understandable that the government wants to help the banks. After all, it was the government's decision to default on its GKOs - Russian treasury bills held by the billions in the reserves of Russian banks - that killed off the sector in the first place.

But in the name of reviving the banking sector, the government is allowing its continued perversion. This cannot go on. Instead of keeping alive institutions whose unchecked bad behavior is a blight on the nation's economy, Russia needs to put in place effective mechanisms for aggressively dealing with insolvent banks. Otherwise it will simply continue pouring money into a bottomless well.