Reality Check India

Rs 2,000 Cr bail out being readied ?

Posted in Uncategorized by realitycheck on January 14, 2009

This is the logic :

  • the USA had an Enron, we have Satyam
  • the USA tax payer bailed-out Fannie-May, so let the Indian tax payer bail out Satyam

But the USA did not bail out Enron.

But India is not the USA.Our farmers commit suicide and we dont have roads for example.

The Central Government has decided to take direct action to remis looking at a salary bailout for the 53,000 Satyam Computer Services employees.

A Rs 2,000 crore package is under consideration to ensure that Satyam employees get their salary on time after it the new board said that they are looking for funds.

CNN-IBN has learnt that the government is looking at giving three instalments of Rs 500 crore to Satyam for the next three months and is planning another infusion of about Rs 400 crore.

Prime Minister Manmohan Singh met senior Cabinet ministers and officials at his residence to discuss the over Rs 7,000 Satyam scandal where the bailout package was finalised.

Source : IBN Live

Manmohan Singh and P. Chidambaram who are completely silent on the Rs 60,000 Crore spectrum scam can hardly be expected to represent the hapless tax payer.

Kiran Karnik says this is a loan and not a ‘bail-out’.

Of course, Sir. A bail out is nothing but a tax payer loan given to a company that has zero chance of getting a loan from anywhere else.

Reasons why the bailout is a bad idea

  • You have not completed the investigations and therefore have no idea about the true books of Satyam. Any bailout must be patient and wait for this to complete.
  • Raju has claimed in his letter that he has personal money of > 1600 Cr in Satyam. Your bailout will mean his money is safe
  • We are sick of hearing about the ‘brand’ (must be an Indian B-School thing). The Satyam brand is finished. No amount of taxpayer money can save it. The only thing that can save the brand is a clean chit from the court leading to the acquittal of Mr Raju
  • The employees can be saved by splitting up the company and selling it in parts. Satyam needs to be taken into bankruptcy. This blog has an idea about how this could be handled.
  • Take into account the legal troubles faced by Satyam in the UPAID case. Satyam might very well lose that case considering the admission of large scale forgery by Mr Raju himself. The claims are upward of USD 1 Bn. The Indian common-mans bail out money will be exposed to this huge risk.
  • The class action lawsuits in the US courts might also well win considering the deliberate defrauding of shareholders, as admitted by Mr Raju himself. The Indian tax payer will be exposed to this risk as well.

The number one reason why the bailout must not happen is

The precedent being set.

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18 Responses

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  1. AG said, on January 14, 2009 at 5:40 pm

    india is past precedents, my friend

    kashmir and the un
    china’s invasion
    shah bano
    terrorism
    socialism
    conversions — sanctioned by state
    partisanship, sponsored by state

    take your pick

  2. Gaurav said, on January 15, 2009 at 11:34 am

    Dude this is right up your alley.

    Stop being intrusive about Satyam: Murthy

  3. rc said, on January 15, 2009 at 2:22 pm

    >> Stop being intrusive about Satyam: Murthy
    Awesome, someone gift his company 485 acres !

    Mr Mynampaty is key but he is going to be a hard nut to crack. He has American citizenship, so I wonder how our agencies can question this Pravasi Bharatiya ?

    Time to throw another evidence ‘dossier’ over the wall ?

  4. GarGi Dixit said, on January 16, 2009 at 4:41 pm

    Neither USA is capitalist, nor India is capitalist.

    its all corruption of mixed economy, and by bail outs, government further loots tax payers money to cause further corruption.

    its shame for India. At one hand it provides bail out for corrupt companies and on other hand it causes havoc on poors. How Government Kills poor Farmers: GM genocide

  5. reason said, on January 17, 2009 at 8:01 am

    Mynampatti is key only if the case is a case of accounting fraud. that has not been established. The law is taking its course such that SEBI has not been able to talk to the main guy yet. Our law can take courses, you know.

    if the money was made and was then taken out, Mynampatti is not key any more than the other board members. and being only a employee-board-member, he is less key.

  6. Barbarindian said, on January 18, 2009 at 10:31 am

    It looks like the Government has opted for a controlled and metered “investigation” instead of a bailout. This happened after BJP finally raised some stink. Congress is paranoid about getting hit by an anti-shining factor.

    This investigation will last decades, depending on how long the money trail is and who are likely to be found on the terminal nodes.

    Still surprised why Raju allowed his goose to be cooked. Perhaps he took the fall in exchange for total immunity of his kids. Public would have demanded some blood.

  7. Barbarindian said, on January 18, 2009 at 11:00 am

    Stories from the South are worse. Such political culture does not encourage honesty. The fraud at Satyam is not a mere economic offence. It is also a political offence. Satyam is a Hyderabad story. Crooks who steal shareholders blind cannot do so without political patronage. Bankers — some of whose hypocrisy is matched only by their pomposity — hand out huge amounts in the full knowledge that the money is going to be stolen by promoters they cosy up to. The kickbacks are substantial, because the first principle of dacoity is that there has to be equitable (if not equal) distribution of the spoils. The slicing order of the stolen cake is this: Company promoter takes the biggest chunk, politician gets the second bite, and banker nibbles at the third.

    Andhra Pradesh is rife with thuggery. There is one business group which claims a Rs 1,800-crore turnover in steel. It has only one small problem. It has no steel plant. A second company has got contracts for irrigation projects from the Andhra Government worth Rs 15,000 crore, but has a working capital of only Rs 55 crore. Do the math, and you know that there are ghost projects hovering all over the State. Another company in the same racket (co-owned by a ruling politician’s son) has Rs 12,000 crore worth of projects on its order books and a working capital limit of only Rs 50 crore from a nationalised bank.

    http://www.dailypioneer.com/150620/Flattery-please;-who-wants-friends.html

  8. reason said, on January 18, 2009 at 11:11 am

    thanks for that link. MJ Akbar also says –

    “You might ask, legitimately, why newspapers do not expose this odious stink. The price of independence is high. ”

    And the price for Padma decorations is higher still.

  9. Gaurav said, on January 20, 2009 at 5:51 am

    More for you to chew over

    Why wasn’t anyone listening to E Sreedharan?

  10. Sharan Sharma said, on January 20, 2009 at 11:41 am

    Hi RC,
    Off-track: Either i haven’t been reading the newspapers so much or this hasn’t got the attention it deserves.

    In the quest for better data, you have good support here:
    > the defence side had argued for showing leniency to those found guilty taking into account various socio-economic factors.

    !

    Some pretty grave stuff in this case:
    1. A one-man judicial commission hinted at an international conspiracy behind the incident
    2. Although the commission headed by district judge Thomas P Joseph recommended a CBI probe into the matter, political interference ensured that this didn’t happen. The panel had hinted at the role of some Muslim League leaders in the carnage.
    3. The then state government headed by A K Antony had refused to order a CBI probe. The Left, then in the Opposition, didn’t favour a CBI inquiry either.
    4. Police recovered a huge cache of arms from the mosque. The collector allegedly allowed Muslim League MP E Ahmed, now MoS for external affairs, to enter the mosque.

    Apparently (and not very surprisingly), these details haven’t appeared in the print version of TOI.

  11. amreekandesi said, on January 23, 2009 at 5:04 pm

    By now we already have news that the government has rejected any bailout for Satyam.

    Good point about not setting a precedent…once the govt saves Satyam, it has to save any bankrupt company, no matter how corrupt it may be.

    The US economy faced problems after the feds set the Bear Sterns precedent, leading people to believe in a false sense of security as demonstrated by the Lehman disaster.

    Besides, the US could afford the billions that have been spent trying to revive the economy. India doesn’t have that sort of cash.

  12. reason said, on January 26, 2009 at 12:10 pm

    “Good point about not setting a precedent…once the govt saves Satyam, it has to save any bankrupt company, no matter how corrupt it may be.”

    it does not appear that you understand the indian system very well.

  13. amreekandesi said, on January 29, 2009 at 2:45 am

    @reason

    “it does not appear that you understand the indian system very well.”

    Please educate me. From my understanding of economics and policy, once the government bails out a Satyam for the purpose of saving 53k jobs, then it is assumed to be an example that will be followed in the future for other similar cases.

  14. reason said, on January 29, 2009 at 3:55 am

    thanks for following up. there are other interesting things (like hindu taliban doing a holocaust in mangalore) that it is easy to lose interest on a small matter of missing 7000 crores from a company.

    the government said it will not bail out satyam. SBI (a public sector bank with majority share holding with the government) announced to IBN that it will gladly lend money to satyam. where does that leave us?

    our public sector banks routinely lend money to specific business enterprises and specific ‘special social sectors’ that then routinely fail to repay the loans. and then the governments routinely bail out the public sector banks. Haven’t you seen this precedent? We even have the precedent of bailing out a private sector bank (GTB). where does all of that money come from?

    actually, a part of that is just printed. Our FM said after the farm loan waiver (60000 crore) that he will provide ‘liquidity’ to banks. all of the pink papers pretended that they did not understand what that means. cant question harvard, and on top of that harvard secular, you know.

  15. Barbarindian said, on January 29, 2009 at 5:12 am

    Neither USA is capitalist, nor India is capitalist.

    You are preaching to the choir.

  16. […] 14 2009 : 2000 Cr Satyam bailout (2G scam ref) Manmohan Singh and P. Chidambaram who are completely silent on the Rs 60,000 Crore spectrum scam […]


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