Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

A key element of this program was a demand from the Kremlin that the oligarchs sink a large part of their fortunes into stabilizing the stock market. There were rumors of an “all-night mandatory meeting held in the Kremlin” on September 16, the day of the AIG rescue, at which “oligarchs were ordered to plunge cash into their own faltering stocks, buy collapsing financial institutions directly, or simply fork over the cash and/or shares.”14 Following this “bail-in” of the oligarchs, the government targeted takeovers and bailouts at the smallest and weakest Russian banks. Coordination was provided by state-owned Vneshekonombank (VEB), where Putin, as Russian prime minister, served as chairman of the board. Five billion dollars was used to take over Sviaz Bank, Globex bank and Sobinbank. Then the deposit insurance fund was recapitalized and the insurance limit raised to $28,000. A $50 billion central bank facility put VEB bank in a position to act as the backstop, with a further $35.4 billion in subordinated debt available at tough rates for troubled oligarch enterprises. The loans would be repayable within a year and otherwise convertible into controlling shares.15 It was not a government takeover, but a conditional threat and a stark demonstration of where power lay.