Things were not meant to end this way, not for a one-time made man in the world of finance and a senior member of Spain’s political class.
Time has finally run out for Rodrigo Rato, the Ex-CEO of bailed-out Spanish lender Bankia and former Chairman of the IMF. Today, after spending one and a half years appealing a four-and-a-half year prison sentence from the comfort of his own home, the man who once led a bank whose collapse set back Spanish taxpayers and investors tens of billions of euros and rocked Spain’s economy to its very foundations is behind bars.
Rato, like dozens of his former colleagues, was convicted of misusing company credit cards, just as Bankia was haemorrhaging funds from every orifice. According to accounts released by Spain’s bad bank, FROB, much of the money went on restaurants, cash withdrawals, travel and holidays, and the like. The amounts spent by each person – which did not show up on any bank documents, job contracts, or tax returns – may have been relatively small (in the tens or hundreds of thousands rather then millions), but it’s the principle that counts.
For good measure, Rato also faces charges of fraud, embezzlement and money laundering, for which, if convicted, he may spend more years behind bars. Allegedly he even laundered funds while serving as IMF Managing Director.
Yet arguably the two worst scams Caja Madrid (and its later incarnation, Bankia) perpetrated under Rato and his recently deceased predecessor Miguel Blesa’s watch — “misselling” complex, high-risk subordinated debt instruments to hundreds of thousands of unsophisticated depositors, and then hoodwinking hundreds of thousands of retail and institutional investors into investing billions of euros in bankrupt Bankia’s IPO — have both gone unpunished, despite the eye-watering sums of money lost (or stolen) along the way.
For Rato, things were not meant to end this way, not for a one-time made man in the world of finance and a former senior member of Spain’s untouchable political class.
In the late 1990s, Rato was vice-president and economy minister in José María Aznar’s government. He is widely credited with lighting the fuse to Spain’s turbo-fuelled property bubble. According to the primary beneficiaries of his policies – people like the late CEO of Santander Bank, Emilio Botín – he was the best economy minister Spain has ever had. Indeed, many tipped him to replace Aznar as leader of the Popular Party. Instead Rato was appointed IMF chief, a position he held until just before the subprime crisis broke.
Now, he is warming a bench in Madrid’s Soto Del Rail prison, presumably in one of the more comfortable cells. It’s a long way to have fallen for a man who once headed one of the world’s most powerful financial institutions.
For the IMF, Rato’s incarceration should (but probably won’t) be cause for serious embarrassment. After all, two of the three presidents of the Fund, Dominique Strauss Kahn and Rato, have now seen the inside of a jail cell system – the former for alleged rape (eventually acquitted), the latter for financial crimes (just convicted). As for the Fund’s current President, Christine Lagarde, in 2016 she was convicted (but not punished) for her role in a controversial €400 million payment to a businessman closely connected to President Sarkozy: what better indictment of the moral corruption of the global financial order?