Russian firms back govt 'dictatorship' over banks

Reuters ^ | Nov 11, 2008 | Oleg Shchedrov

[Tailgunner Joe]

Yevgeny Primakov, who led Russia's government as it emerged from its previous financial crisis 10 years ago, said a "state dictatorship" was required to ensure tens of billions of dollars flowed through banks to their intended recipients in industry.

"Our biggest concern is that the thrombosis of credit lines and the rise in banks' rates is leading to falling production," said Primakov, chairman of the Russian Chamber of Commerce and Trade, which unites and represents various Russian businesses.

In an address to President Dmitry Medvedev at a Kremlin meeting attended by the heads of regional chambers, he said the rescue package should be channelled to the real economy.

"This can only be done through a tough state dictatorship over the banks," Primakov said.

Russia has pledged $200 billion in state aid to help its economy ride out the global financial crisis, but its leaders have shown growing concern in the last few days that some of this money has stalled in the country's banking system.

Russia recorded its biggest ever monthly net capital flight in October - $50 billion - at least some of which occurred as a result of banks plugging holes caused by the financial crisis.

Medvedev, addressing the meeting, warned that government money was intended to kick-start industrial production and should be used to achieve this goal.

"Most of the liquidity has arrived," he said, "but the companies have not received it."

"The liquidity is not supplied to allow banks to buy foreign currency or reserve the money in foreign banks."

Medvedev's comments echoed a warning by his predecessor and Prime Minister Vladimir Putin on Monday, who said money movements out of the country would be strictly monitored.

[DonaldC]

Not sure it is that different here with regards to who the people trust right now.