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To: goldsnow who wrote (16184)	8/19/1998 8:02:00 PM
From: C Hudson	Read Replies (1) \| Respond to of 116912

Thanks goldsnow. That makes sense. <eom>

To: goldsnow who wrote (16184)	8/19/1998 9:12:00 PM
From: Alex	Read Replies (1) \| Respond to of 116912

What's with the headline on Drudge Report - Clinton: Resignation. World Exclusive Tonight???????????

To: goldsnow who wrote (16184)	8/20/1998 8:34:00 AM
From: Alex	Respond to of 116912

Russian Mafia Gather to Protect Their Banks Devaluation Removed Source of Cheap Dollars to Pay Dollar Loans Moscow's White House was surrounded by fleets of black limousines and jeeps crammed with bodyguards yesterday afternoon, as Russia's "oligarchs" came to discuss the country's financial crisis with Sergei Kiriyenko, the prime minister. The outcome of such meetings will determine whether the government can succeed in imposing harsh new market disciplines on the economy or will once again succumb to the "crony capitalism" which has besmirched Russia's transition. Top of the agenda was likely to be Russia's troubled banking sector, which has been devastated by the government's decision to allow an effective devaluation of the rouble. Many of the biggest banks have amassed sizeable dollar debts, which they will now struggle to service, and have additional exposures in the dollar forwards market. Several are technically bankrupt. The challenge for the central bank is to prevent a systemic collapse of the banking sector while minimising the costs and consequences of any bail-out. To this end, it announced on Monday it would help support a pool of 12 core banks and would impose a 90-day moratorium on their foreign debt obligations. The idea was that all the banks would help each other out to keep an inter-bank lending market alive and ensure that their depositors - and ultimately their creditors - did not suffer more than necessary. Mergers among the weaker banks would also be encouraged. The benign interpretation of this action was that the government thought it essential to preserve confidence in the banking system and protect household depositors. The fear was that if one big commercial bank collapsed it would spark a run on all the rest, destroying the banking system and causing havoc in the broader economy. But some of Russia's stronger banks are already questioning why they should be held responsible for the more reckless actions of their rivals. Yesterday, Vneshtorgbank, the foreign trade bank, said it did not intend to participate in the pool as had been previously announced. "It is not completely clear to us what the end goals and tasks of the decreed pool should be, inasmuch as its working document does not have a sufficiently concrete character," says Sergei Kolotukhin, the bank's deputy chief executive. Moreover, unless it resorts to the printing press, the central bank has few resources to support the troubled banks. By forcibly restructuring Russia's treasury bill market, the government will also inflict more short-term pain on the country's commercial banks. These banks are also cut off from all external sources of funding. This week, Standard & Poor's, the credit rating agency, attached a "not meaningful" rating to the counter-party risks of several Russian banks given the imminent risk of default. Some of the smaller banks already fear that central bank support will be determined more by political clout than commercial viability. The IMF is believed to have expressed similar concerns to the government, arguing that the banking sector should be thrown open to more international competition. Augusto L¢pez-Claros, chief Russia economist at Lehman Brothers, the US investment bank, says the Russian government would win credibility if it now imposed harder budget constraints on the banking sector and allowed failed banks to collapse. "I think that the influence of the owners of these banks far outweighs the importance of the banks in the overall economy. Bailing them out, which is essentially what the government is doing, does not send a very good signal to the rest of the economy at a time when the government is talking about accelerating bankruptcies," he says. Dirk Damrau, head of research at MFK Renaissance, a Moscow-based investment bank, says many of the banks could be allowed to fail without too much impact on the broader economy. The level of financial intermediation in Russia is still extremely low. While Sberbank, the state savings bank, holds 78 per cent of all Russian bank deposits, the next biggest retail bank, SBS-Agro, holds just 4 per cent of household savings. Mr Damrau suggests that if necessary it would still be possible for the government to guarantee banks' household deposits while allowing troubled banks to go bust. "Most of the assets of these banks are long gone," says Mr Damrau. "All that is left are nice buildings and cheesy Swedish furniture." The Financial Times, August 20, 1998