Entering Dante's Hell: Beware Public Corporations

[FRED]

In honor of today's nationalization of US banks in America, a warning: what happens of private control is not quickly restored. After long term public ownership, privatizations can be even worse. One hour documentary on Argentina. We warn you now: you won't like the parallels.

It all starts at the top.

Hat tip to iTuliper Rajiv for the video.

[World Traveler]

Parallel to U.S.: Venezuela 1994, Huge gov't banking bail-out

The causes and parallels to what we see in U.S. today are startling. Causes in Venezuela were insider dealing, cronyism, corruption, de-regulation, lack of government oversight and enforcements of the banking laws. So that by 1994, some major Venezuelan banks were essentially Ponzi schemes. Excerpts and links to 1994 Times article below.

Venezuela government had to spend huge sums to bail out the banks. As they were being bailed out, insiders/bankers sent their "winnings" overseas. Otherwise known as capital flight...and note that Michael Hudson is warning that because U.S. gov't oversight of this bail out is so weak, there's a real chance that some of the U.S. bail-out money will be sent overseas by U.S. banks/insiders being made whole.

In the mid-1990's, as a result of bad banking and low oil prices, the Venezuelan economy was in a state of collapse. Once a place with a vibrant middle class, by 1997, the middle class had all but disappeared - 90% of population were living below poverty level.

This then paved the way for Hugo Chavez's first election to the presidency, with over 60% of the vote. He was a new party, 3rd party candidate...the traditional 2 parties, both controlled by the tiny elite of super-rich, had lost all credibility.

By JAMES BROOKE,
Published: May 16, 1994

In Latin America's worst banking crisis of the free-market 1990's, a string of failures since January has left half of Venezuela's banking industry in the hands of the Government.

Venezuelan taxpayers face a $6.1 billion bailout bill, as the Government props up nine banks, including Banco Latino, the nation's second largest. More banks may fail as inspectors unravel a five-year-long banking spree generated by deregulated interest rates and minimal Government supervision.

"Eighty to 90 percent of the banking system is compromised in this catastrophe," said Oscar Garcia Mendoza, president of one of the strongest banks here, Banco Venezolano de Credito.

The costly bailout is contributing to political instability. And while fugitive bank directors enjoy comfortable overseas exile, Venezuelans are paying for the bank failures with high inflation, reduced government services and shrinking economic activity.

Venezuela's $6.1 billion bailout represents 11 percent of Venezuela's gross national product and 75 percent of the Government's 1994 national budget.

A quote from prresident of bank at center of storm... "I was just doing what everyone else was doing." Does that sound familiar????

"I maintain that the presidents of many banks in Venezuela have signed many more balances with false figures than I ever have," Gustavo Gomez Lopez, Banco Latino's president until three weeks before the fall, wrote in March in a statement defending himself against charges of fraud, criminal conspiracy and undue appropriation.

http://query.nytimes.com/gst/fullpag...=&pagewanted=3