LA PAZ, Bolivia -- The government of President Hugo Chavez of Venezuela, facing a crisis at several banks acquired by his supporters, moved over the weekend to assert greater financial control by detaining one of the country's most powerful financiers and forcing the resignation of the banker's brother, who is a minister and a top Chavez aide.| The crisis is called, 'the banks are insolvent.' Soon to be in your own home town ... |
| Socialist fat cats. You'd think that's a contradiction but no, we've seen plenty of them over the decades ... |
| Fat, and getting fatter, busily feeding the crocodile while fondly believing that would make it eat them last... instead of realizing it would eat the closest fattie. |
"We have been watching in awe at everything that has gone on over the past week, from the collapse and runs on the banks to the revolution eating its own," said Russell M. Dallen Jr., who oversees capital markets operations at BBO, a Caracas investment bank.
The crisis in the banking system began unfolding last Monday when the government seized control of four troubled banks, including those with ties to Mr. Fernandez Barrueco, and then seized three other banks on Friday. Mr. Fernandez Barrueco was arrested after he could not explain the origins of money used to buy the banks.
Together, all the seized banks are estimated to account for less than 20 percent of the country's banking system, dimming some fear that the crisis could infect other areas of Venezuela's oil-based economy and easing concern of a Dubai-like debt crisis's happening in Venezuela.
Still, Venezuelan markets were temporarily gripped by fear last week after Mr. Chavez threatened to nationalize the entire banking system if bankers did not obey the law. Capital flight fueled a plunge in the black-market value of the currency, the bolÃvar, and traders unloaded Venezuelan bonds before a reverse of panic selling on Friday.
Mr. Chavez, seeking to calm the population, said he was simply seeking to protect depositors. In his Sunday newspaper column, he reserved some vitriol for the arrested bankers, calling them "vulgar thieves, white-collar robbers, pickpockets."
Mr. Chavez's government still faces questions about the quick accumulation of fortunes by the arrested bankers, who drew deposits to their banks from deals with regional governments controlled by the president's followers, leaving open the possibility that the purge could spread.
| Remember guys, it's okay to grab at the boodle, but always pay your 10% and never, ever embarrass the head cheese ... |
The bankers embroiled in the scandal kept low profiles while expanding their empires. Arné Chacón, a former lowly army lieutenant, worked as a government tax official earlier this decade before quietly emerging as one of Venezuela's top magnates, embarking on acquisition sprees that included banks, insurers and race horses.
| That doesn't sound 'low profile' to me ... |
Mr. Fernandez Barrueco, 44, forged ties with the government during a 2002 general strike by refusing to stop supplying food to grocery stores. Expanding into trucking and banking, his fortune reached $1.6 billion by 2005, according to an assessment by the Venezuelan affiliate of KPMG, the accounting firm.
The rise of these magnates had become a vulnerability for Mr. Chavez, who faced criticism from within his political movement over the seemingly unfettered operations of these decidedly capitalistic businessmen.
| It's not capitalism, it's fascism ... |
This intermingling of state and private interests did not stop during Mr. Chavez's government. Despite his efforts to assert greater state control over the economy, corruption in Venezuela is thriving by various measures. Transparency International, a Germany-based group that compiles a global corruption perception index, ranked Venezuela 162 out of 180 countries.
"We're now seeing a replay of this sudden-wealth mechanism, in which bureaucrats and businessmen become allies to capture oil revenues," said Pavel Gómez, an economist at the Institute of Superior Administrative Studies, a Caracas business school. "Some of these players are now falling, but the system will allow other beneficiaries to emerge."