Taking Our Cues from Russia?

Whether or not you agree with the recent actions by the US Federal government, it's hard to argue with the statement that it is beginning to look a little like Russia.  We all remember the headlines in 2004/2005 when the Russian government seized control of Yukos alleging that the company owed billions in back taxes.  Then in July, BP had to pull out of its energy joint venture in Russia citing 'sustained harassment' on the part of Russian authorities.  Just as Russia has been taking control of its energy companies, over the last two weeks the US government has taken over Fannie Mae (FNM) and Freddie Mac (FRE) in our nation's financial sector.  And the similarities don't just end there. 

Last Friday, the Russian government announced that it would buy $20 bln worth of equities for each of the next two years.  Now less than three days later, we are seeing headlines that the US government will also take equity stakes as part of their 'compensation' for the $700 billion government bailout. 

Now we all remember when President Bush said he found Vladimir Putin to be a 'very straightforward and trustworthy' person who was 'deeply committed to his country and the best interests of his country.' But taking our cues from Russia?  That may be taking it a little too far.

Comments

[MarvinMBA:]

Let the junk bond holders rework the real estate and assets they acquired like everyone else that holds secure paper. Why bail them out? This is a raid of our very lives and existance. Congress is destroying the US if this giveaway deal to the holders of this paper proceeds. There was never a guarantee on this junk paper anyway. Marvin the Maven

2008 Sep 22 04:10 PM

[Inzight:]

Very interesting observations and parallelism, thanks for the insight!

mining101.blogspot.com

2008 Sep 22 04:24 PM

[Chris B:]

Assets = Liabilities + Owners' Equity

so...

Government = National Debt + Taxpayer Equity

Which do you think has control over the assets - the foreign creditors who own the debt or the taxpayers?

Since the government would run out of money if the lending was ever cut off, I would say the foreign creditors. Just like in a bankruptcy, the assets have been seized and used to try to make the creditors whole. The fact that our own government would shift open market investment losses from the creditors to the taxpayers illustrates this realization nicely. We no longer own the government. We squandered it away on silly wars and porky budgets.

2008 Sep 22 04:59 PM

[Contrarian ...:]

When the smoke clears, it may be that Russia is a better investment...

"The irony, of course, is that Washington and Moscow are now marching in lockstep with each other when it comes to their stance on market intervention. After a series of unprecedented bailouts, the US has effectively renounced the principle that markets are self-regulating."

www.contrarianprofits....

2008 Sep 22 07:18 PM

[carey_jim:]

You are stretching things using the proverbial bed of Procustes.

Russia and the United States are at the antipodes and if there could be another antipodes, China would be located there.

Russia has a thousand year history of totalitarian governments. America and Britain have a four hundred year (at least) history of the people poking their noses seriously into the affairs of the crown and the aristocracy, as you and many other Americans are doing now.

Keep up the good work :)

2008 Sep 23 01:11 PM

[Urbane Gori...:]

OK... A little tongue-in-cheek there... Our government is taking over financial institutions to push off the spectre of a major dislocation of our financial institutions that would - and still may - bring us and the world to it's knees. The Russian government under Putin and Medvedev are playing games to load their favorite companies with equity stolen from other companies. (Lukoil and BP are just two). Nevertheless, interesting parallels.

I'd have to point to our 'gulags' in Syria, our cloak and dagger 'rendering' of uncharged 'people of interest', illegal and immoral torture, illegal and immoral spying on Americans, the 1984 approach towards those that question the direction that our administration is moving (think Valerie Plame), the hiding of facts from the American public such as not allowing photos of dead Americans to be publicized, hiding behind the 'secrets act', stonewalling investigations, and etc. to be more comparable to the old USSR/KGB period.

jegan ;-)

2008 Sep 23 02:54 PM

[carey_jim:]

I agree that when you fight with a hated enemy for a very long time (Russia,) you inevitably acquire some of the hated characteristics of your enemy as the only way to defeat him (The CIA and FBI are examples.)

But, starting with Alexander Hamilton and John Adams, there has always been a totalitarian streak in American government.

Going even further back to John Winthrop and other founders of the thirteen colonies, the totalitarian tendency is even more pronounced in American history.

Winthrop's attitudes to the Quakers are far more comparable to the old USSR/KGB period than Bush's naked aggression in Iraq.

To paraphrase Willy Sutton's answer to the question of why he robbed banks, "Because that's where the oil is."

2008 Sep 24 12:50 AM