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Éva Várhegyi The Banks of the Mafia State Prologue: Postabank, Hungarian Development Bank (MFB) In its first administration, the Orbán government had already recognized the potential opportunities in the banking sector. Out of the possible ways that the government could have managed the near-bankruptcy of Postabank , one was chosen that promised to provide a financial payout as well as a political one: it dismissed the bank’s managers in the summer of 1998 and made a move for its revenue. Using taxpayers’ money to bail out the bank provoked serious concern in the general opinion of professionals and politicians at the time. This was not merely because, from the start, the company managing the bank’s dubious claims retained the option to withdraw money, but also because the HUF 152 billion of capital advanced to Postabank far exceeded the extent justified by certified audited reports. The government’s capital infusion into Postabank merits attention not only because of the uncontrolled use of public funds, but also because the method of nationalization through the plundering private owners first appeared at this time. The government reduced Postabank’s capital of HUF 42 billion on paper to one-half-thousandths of its value, then provided it with HUF 152 billion of capital, with the result that the bank’s equity capital was again increased to HUF 40 billion. But in the wake of this reduction in capital shareholders lost the value of their investments , while the government’s stake increased to 99.7% following the capital increase. This technique was also seen fifteen years later, when the state acquired some HUF 3 billion of Takarékbank assets, or one-fifth of i6 Maffia II 00 book.indb 295 2016.12.07. 15:47 296 TWENTY-FIVE SIDES OF A POST-COMMUNIST MAFIA STATE its equity capital of 15.5 billion, through a capital infusion of only HUF 655 million.1 Due to its pressing lack of funds, the government flirted with the idea of selling Postabank again. Since privatization rules required a competitive tender, the government came up with the trick that it would not sell the bank, but rather look for a state-owned partner for it. However, OTP, the bank designated for this, offered a smaller amount than Postabank’s own capital, so the government halted the deal. By accepting this offer, it would have in fact acknowledged that Postabank also lost capital under its direction. We have somewhat more information about how the Hungarian Development Bank (MFB), which was relieved of its banking activities, was used. Its formation, spanning across different governments provided the comfort of a “state within a state” status to the prevailing powers: the opportunity for the uncontrolled use of its funds. Orbán’s first government gave this stateowned bank the task of financing the construction of a 600 km-long highway in order to circumvent the public procurement process and select construction companies without a tender. This was—according to the letter of the law—because MFB was not subject to the public procurement law. In spring 2001, the Orbán cabinet continued to weaken the special regulations related to government-owned banks. The bank finally ended up in the government’s outstretched hands through a legal amendment: a law that obliged parliament to supply HUF 60 billion yearly to the bank’s capital, away from public view and operating as a money-sucking ATM, providing guarantees for the bank’s loans at will, while—though defined as a nonprofit bank—allowing it to take on many times the risk that profitmaking banks are able to assume. Fidesz’s loss in the 2002 election interrupted, for a period of time, the expansion of its clientele and the further development of an institutional framework that provided for the uncontrolled private use of public funds. In 2010, however, Fidesz was once again able to take over the reins of this state bank. In the meantime, Postabank had been sold to Austria’s Erste Bank, and so the second Orbán government had to find new sources for funds. In his second term in government, Viktor Orbán devoted even greater attention to the banking sector than previously. But this was not for the same reason as leaders of other countries, who had to compensate for bank losses in the global credit crisis of 2008 with injections of government capital to maintain the viability of their financial systems. In this respect, the Hungarian government found...


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MARC Record
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