Thursday, June 25, 2009

Russian Banks in Very Bad Shape: Government to Bailout and Take Board Seats (Nationalize)

The Financial Times reports today:

"Russia is considering a banking bail-out that will go further than measures taken by the US, as fears grow that bad loans could paralyse the economy. "

This is whay I stay away from financials. If you consider financials, I'd try straddles instead. See previous post on XLF.

The Russian proposal, involves government issuing bonds to boost the balance sheets of the banks. The state would get preferred shares. Unlike the US bank bail-out, the Russian scheme would see the government take board seats and get veto rights at the banks it bails out. Very close to nationalization, and the same can be expected in many other countries.

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