Developments in the Hungarian National Bank corruption case

One goes for a little outing to Felcsút to admire that lovely little choo-choo train and what happens? The Hungarian public learns that, at least in the case of the Pallas Athene Domus Animae Foundation, György Matolcsy, chairman of Hungary’s National Bank (MNB), was directly involved in making its financial decisions. This flies in the face of the official story–that once the Hungarian National Bank parted with 260 billion Hungarian forints (almost $1 billion) of public money the management of the bank had no say in the affairs of the foundations.

Let’s start with the backstory, how the very existence of the MNB foundations and the extent of their funding was unearthed. The information initially came in a letter to the editor of HVG in the summer of 2014, shortly after the foundations were established. The letter called attention to a number of foundations established by the Hungarian National Bank and even mentioned the sum of money that had landed in these foundations. But the amount was so huge that the journalist assigned to the story was certain that the 200 billion forints mentioned in the letter must be either a typo or a figment of the letter writer’s imagination. It was far too large a figure. In August 2014 the journalist, Károly Csabai, who now works for Világgazdaság, started digging into the funding of these foundations. A law suit demanding that the National Bank reveal financial details of the foundations ensued. Verdict after verdict went against the bank, but it kept appealing. It wasn’t until March 2016 that the Kúria, the highest court of the land, declared that MNB had reached the end of the line. It must hand over the information.

Even as the MNB was meeting resistance in the courts, the foundations continued to hand out money without worrying about possible consequences. Perhaps György Matolcsy simply believed that the bank would be able to keep its foundations’ activities secret. People who know him say he is a modern-day Pangloss who believes that everything will turn out just fine regardless of how hopeless things seem. Perhaps he was also encouraged by the lawyers of the bank who were convinced that even if they lose the suit the arrangement would ultimately withstand legal scrutiny. But things are starting to fall apart.

In addition to the media, Bertalan Tóth, an MSZP member of parliament, has been pressuring the central bank via the justice system for more information. Today at last he received the documents concerning the financial decisions of Pallas Athene Domus Animae (PADA). The chairman of that particular foundation was Matolcsy himself, and the documents reveal that all investment decisions were the exclusive right of the chairman. That in itself is bad enough, but what is truly embarrassing is that the bulk of PADA’s money (well over 60 billion forints) was kept in the tiny little bank of Matolcsy’s cousin, Tamás Szemerey. And, worse yet, the foundation lent money to the struggling bank, presumably to avert liquidity crises, at a lower interest rate than the national bank’s stated rate at the time. It is noteworthy that Szemerey’s bank lent a substantial amount of money to Matolcsy’s son Ádám to enable him buy a furniture factory that would otherwise have been way beyond his means. I guess we can say that, in an admittedly indirect way, the Hungarian National Bank financed Ádám Matolcsy’s business venture.

Bertalan Tóth has also calculated that the foundations, by buying government bonds, added the equivalent of 0.7% of the Hungarian GDP to the national budget. In this way they massaged the size of the deficit. Last year’s official deficit was 2.5%, but without the extra money pumped into the budget by the foundations, it would have been over the 3% allowed by the European Union.

Bertalan Tóth and others wanted to question Viktor Orbán and György Matolcsy in parliament today. Neither of them showed up. Matolcsy sent one of his hapless deputies to answer the questions he was supposed to answer himself. András Schiffer of LMP demanded Matolcsy’s resignation from Viktor Orbán, who was also busy elsewhere. In his place András Tállai, undersecretary of the ministry of the economy, claimed that the government has absolutely nothing to do with the central bank. This is true in the sense that the government cannot dictate the bank’s monetary policy. But here we are talking about the questionable financial activities of the bank. Since the bank is owned by the Hungarian government, the government is responsible for any mismanagement that might take place at the MNB. Tóth compared the managers of the Hungarian Bank to the characters in the 2013 American movie The Wolf of Wall Street. His fellow MSZP member of parliament Lajos Korózs called the Hungarian National Bank “the residence of criminals,” saying its decision makers were planning to steal most of the money they deposited in the foundations.

So far Fidesz doesn’t have a competent point man to deal with this scandal. Lajos Kósa, who replaced Antal Rogán as the leader of the party’s parliamentary caucus, is famous for his bungling linguistic performances. This was certainly the case today when Index’s Szabolcs Dull pumped him for his reaction to the documents that demonstrate Matolcsy’s critical role in the financial affairs of PADA. Kósa, after some long and incomprehensible blabbering, could only fall back on the claim that “this assertion has not yet been ascertained” when the facts are there in black and white for everybody to see. The whole pitiful performance is available on the website of Index.

Lajos Kósa explains his interpretation of the connection between György Matolcsy and his foundations

Lajos Kósa explains the connection between György Matolcsy and his foundations

All in all, this is a case that will haunt the Orbán administration for a while. A few days ago the top brass of Fidesz expressed their relief because, according to their poll, only 10% of the electorate had heard anything about the central bank’s foundations. Moreover, they figured that the whole case is far too complicated for the man on the street to comprehend. I wouldn’t be so sanguine in their place. First of all, the scandal can only grow as Matolcsy will have to release ever more information. For example, there are all those “private persons” who received money from the foundations. So far their names haven’t been revealed, but pressure is mounting to release their identities. Moreover, ordinary folks don’t need fancy explanations about private as opposed to public money. It is enough for them to understand that these people, along with their friends and families, stole a heck of a lot of their hard-earned money.

May 2, 2016
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petofi
Guest

I am of the opinion that Hungaricoes deserve the theft of all the money: lessons in the norms of civilization are expensive…

webber
Guest

Nobody gets what they deserve in this life.

csipa
Guest

Petőfi, it’s one thing what the Hungarians may deserve, but surely these arrogant mafiosi do not deserve to keep and enjoy that money (we talk about hundreds of billions of forints).

Alas they are smart lawyers who launder money effectively and no court will ever be able to touch those amounts, the strómen were selected well. There will be some legal wrangling as usual but the lands, castles, pig farms, hotels, Dubai bank accounts will be kept for the next generations.

webber
Guest

Sort of related – a group of Hungarian soccer fans who hate the Felcsút team have composed a soccer chant about the team losing its NB1 status. Like many such chants, it’s rather rude, but the refrain “the funds lost their public character” (elvesztette a közpénz jellegét) is a clever parody of Matolcsy’s claim that by handing public funds to private foundations, the funds are now private and, therefore, nobody has the right to know anything about them.

Link to video here: http://index.hu/mindekozben/poszt/2016/05/02/el-vesz-tet-te_a_kozpenz_jelleget_a_kozpenzt_jelleget_a_kozpenz_jelleget_-_uj_focirigmus_szuletett/

If soccer fans, not known for following news or intellectual dexterity, can come up with this sort of thing, my guess is that a LOT of Hungarians are disgusted by the scandal but, as in so many surveys, would rather pretend they know nothing about it when asked by public opinion pollsters because ordinary people, especially in the countryside, are afraid of revenge from local Fidesz officials.

Rahan8
Guest

In 21010 a new system change (rendszerváltás), just like one in 1990 stared.

Poor lefties didn’t even understand the situation and still don’t get it.

There is a new system, a totally new and resilient (with smart legal solutions, off-shore companies, stróhmen and the like) elite, and such lefties accept the terms of the new system. They have no other choice and they don’t even care.

The Orban system and its elite is here to stay. Game over for the lefties.

In the fall there will be a huge referendum against the migrants – 2016 will end on a high note for Fidesz. In 2017 billions will be thrown at some key constituencies and then Orban will be reelected in 2018 (the election system helps, but still).

http://inforadio.hu/belfold/2016/05/03/tolgyessy_peter_uj_rendszervaltas_indult_el/

webber
Guest

Poor Fidesznik! You still don’t know how much Hungarians have started to hate you and your party. You believe your own propaganda.

We all remember how surprised Hir t.v. people were when they realized how much people hated them during the internet demonstration. They were shocked, and hurt! They’ve since changed sides.

Your days are numbered. It’s nice that you choose to spend them in a pink fog of your own imagination. Just keep it up.

webber
Guest

Rahan8 – Naponta mennyi ilyet kell írnia, hogy fizetést kapjon? (szellemi k.)

Csa
Guest

Even Gyurcsany says that probably no political side will have majority in 2018 and with great difficulty the left and Jobbik might be able to dismantle the Orban system. Might.

In other words, Orban and his people will stay and enjoy the dough. Imagine, there will be a legal wrangling for months just to start the investigation (and Jobbik will be quietly asked by the Russians to be friendly to Orban) and then charges will be presented, and then the trial lasting for years, no, Tóni Rogan and his friends will have the last lough.

Don’t count on the lefties to hold Orban accountable.

Orban let Gyurcsany off the hook and Gyurcsany knows that he has to honor the pact too.

No, Orban will stay. He is much smarter then the left and Jobbik put together.

http://444.hu/2016/05/03/gyurcsany-szerint-nagyon-fura-veget-er-majd-orban-rendszere

webber
Guest

You seem to have a hard time understanding what you read. Gyurcsany said it MIGHT happen that no side will have a majority after 2018. He did not say “probably.” He did not say “with great difficulty.” He merely speculated about the coming end of the Orbán regime, that is he believes it will end in the near future.

If you Fideszniks find solace in those words, from Gyurcsány of all people, well…. The last thing to die is hope, they say.

webber
Guest

This must be the first time a Fidesz propagandist (a paid one, certainly!) has cited Gyurcsány as the source of truth!
So, I guess it shouldn’t come as a surprise to me that a Fidesz propagandist who does that can’t actually understand what s/he reads.

Guest
Re: ‘The Orban system and its elite are here to stay…’.rendzervaltas’. It will be interesting for the future to see how far the pillaging and plundering of seemingly bountiful coffers goes in the supposedly new ‘system’. A system by the way while not old in the ways of government ripping off its society , but appearing to follow its cue from the fellows with the hammer and sickle…hammer to knock you out , sickle to slice you up. Just to make sure one gets the ‘message’. Fidesz appears to create nothing productive but rather copies from the Putin fiduciary book where the world of business and government work together consciously to collaborate and make an entity unabashedly using corruption to make the ‘best of all new Magyar worlds’. It will be a wonder if this rot can last. The end game in this has to be in the offing. It is only a matter of when. It cannot continue for it stands to reason a nation cannot exist with this kind of reckless , arrogant and corrosive behavior within its government. A reckoning will be demanded. And astrology sure ain’t going to help these nobodies when it comes.
Member

Have you had a thought about that not everyone is lefties that is opposed to this governance,

spectator
Guest

Albrecht, here you are talking about humans with own will and rational, even logical way of thinking, who may even able to decide themselves what (ideology?) may want to follow/join to, if any.
Be honest and admit, please, that you communicating way outside of the Fidesz-zealots mindset and comprehending capacity!

Your comment will only confuse the poor sods, and they’ll totally lose their bearings in time of attack!

As you know from the invaluable validation of “Kuruc Info”, we are all Yews and lefties who participating in this blog, so it quite fruitless to try convince them on some contrary fact.

(Even if a cursory inspection would be able to disclose me, if it was ever an issue.)

Take it easy!
We are all Yews, even worse, all lefties Yews here!
Amen!

Observer
Guest

@csa

And pigs will fly ………

Observer
Guest

@rahan

Re your link: P. Tölgyesi DID NOT say what you’re trying to suggest .

He only said that in 2010 Orban changed the political system (rendszerváltás) and on this point we all agree.

The democrats call this change constitutional putsch against the democratic state and acknowledge the new system as the ORBAN MAFIA STATE.
So, we recognize the situation very clearly, and see that the Orban “elite” is a bunch of criminals ripping the state.

I admit that as a result of the the suppression of the media many people don’t know the appalling truth, but we are working on it. Hard work it is, too many dumbasses and dupes.
In case of an financial/economic crisis the Hungarian economy will nosedive, the social systems will collapse and the (bloody) end will come very quickly.

Member

“In 21010 a new system change” Well, I guess we only need to wait 18994 for Orban to come back! Good news. Thanks for this.

Member

Please read my comment from Today 9:32 am. Which category do you find yourself to fit in?

spectator
Guest

“There is a new system, a totally new and resilient”

Now, here is where you totally off.

You see, the system — originally called ‘National Socialism’ — far from being new, let alone ‘totally new’!
Yes, dear, it started already nearly a century ago, and failed miserably since already about 70 years, so you may think again regarding your adjectives.

If you’re still uncertain, I recommend some reading straight from the source — directly from the National Socialists themselves — how they define their ideology. Then you may figure out that even if in Orbanistan the “words has another meaning”, the commonly agreed upon and established definition just about the same as the Orbanist credo. Here it comes:

http://www.national-socialism.com

If you still in doubt, try the abbreviated version “Nazi”, — it makes miracles and will enlighten you right away.
Yeah, I know that “every joke is new to a newborn”, but hey, obviously you’ve spent some time already polluting the Earth with CO², so you ought to know what are you talking about, aren’t you?

Be a “man” (for one times sake, at least) and admit it, will you?

Thank you in advance!

webber
Guest

A question for economists:
If (God forbid) the Forint comes under pressure because of shorting by speculators, or some other form of “attack” (to use Fidesz’s terminology), will the National Bank still have enough funds to bolster the Forint and stave off the speculators?

Matolcsy has squandered so much, that it worries me.

Observer
Guest

Cost of corruption for dummies:

VAT could have been reduced from 27% to approx. 22% in 2014-15 if the Orban mafia were not stealing these billions.

Only the overpricing of the EU financed contracts (pocketed by the mafia) accounts for approx. 470 billion Forints/year. Add at least 25% ripoffs for all other government activities, bearing in mind there is 49% GDP redistribution in Hungary.

The heist of the last 100 years.

Hajra magyarok (fizenti)!

nwo
Guest

Squandering nearly $1 billion of Government money in a country that is severely over indebted. Offering preferential financing to a failing bank controlled by a relative of the MNB President. Having the MNB President “invest” Government money in violation of law. Manipulating official Budget deficit ratios. Indirectly providing finance to the son of that same MNB President. Where is the scandal? This seems like perfectly normal behavior in Freedonia, Zubrovka or Molvania. Taking a bribe from Altsom? Now that is more in keeping with CEE political elite’s behavior.

Member

Matolcsy is a criminal. Plain and simple. Peter Polt is also a criminal who allowed money to be laundered directly to his wife. Anyone who stands up for them is also a criminal, who in some ways benefit from the steeling of money from the Hungarian and EU taxpayers. I guess that includes most Fidesz members of the current government, the speaker of the house and the PM. The “regular people” who are still behind Fidesz after these are simply idiots (no apologies), and/or totally crooked people who are afraid to end up in jail when the time comes to real prosecutions.

webber
Guest

Given the man’s fear of the number eight, August 8, 2018 seems like a fitting date to begin the arrest and prosecution of Matolcsy. Polt can go any day of the year, after the elections.

Csa2
Guest

Neither Orban, nor Matolcsy and Polt will leave. The solution is ready (see linek below) and the 2018 budget will contain even more goodies.

You wouldn’t know but Orban and co have been operating in campaign mode for months now – meanwhile the leftists don’t have a clue as to what they really want to do elected (and the voters know that), let alone about he election campaign (hell, MSZP doesn’t even have a formal leadership). Though no surprises here.

The script is ready (e.g. a referendum on migrants in October/November, a slam dunk for Orban, it is a great side show like Brexit for Cameron, it just preoccupies, pacifies people).

Orban can’t lose. Period.

1 million people will vote for him for him from Romania, Serbia and Ukraine (the local Hungarian organizations will receive tens of billions to get the machinery up and running) and this is just the beginning.

You can daydream, but Orban is here to stay.

The days of leftists and liberals are over for good. Sorry to bring the bad news.

http://www.portfolio.hu/gazdasag/magyarorszag_bukja_a_felminositest_az_oriasi_fordulat_miatt.231231.html

Istvan
Guest

Csa2 do you recall Ildiko Vida, the Fidesz supporters on this blog all said Orban had her back as we said in the US Army. Orban will dump Matolcsy when he believes he needs to, there is no loyality among thieves.

Observer
Guest

@csa2

..goodies… upgrading.. …. and flying pigs.

Observer
Guest

@Csa

Obviously you don’t understand economics and even what you’re reading in Portfolio’s article above.

The sources of the additional spending are rather doubtful, e.g. the main one being the funny tax credit introduced recently (I suppose to benefit some oligarch, because it’s conditional upon 500% growth of EBT from previous year!!).

In practice a significant part of the additional spending will end up as extra profit in the oligarchs pockets, with very low multiplier effect.

The total additional spending of 500 billion will perhaps stop the deterioration, but will not improve the situation in healthcare, education. There is hardly anything in infrastructure.

In addition to the current system of lying and deception the 2016 budget contains new provisions to obscure further the public finances, e.g. of public energy companies and others.

It’s a bunkum – nesze semmi, fogd meg jól.

Guest

Re: prosecution

If things continually go on with banditry as they are proceeding in the country it could be a fantasy that those pricey futbol stadias built on the backs of the electorate would make great courtroom venues for dispensing judgment on those oh so ‘felelos’ stewards of Magyar insitutions. Here come the judge! As we know stadia have usually been such great places to display ‘thumbs up or thumbs down’.

webber
Guest

I have the strangest feeling that these stadiums will prove to be structurally unsound within a decade, if not less.
After Fidesz was in power the first time some of its construction projects started falling to bits – stone facing just started coming off at random in some places.
In the National Theater, completed in 2002, what looks like marble inside the building is, often as not, actually plastic (just visit and tap the stuff). Charge for marble, install plastic…
I would just bet that a few of these stadiums will have some major issues in the next decade.

Guest

Rahan8: ”Poor lefties didn’t even understand the situation and still don’t get it.”
Csa: ”Don’t count on the lefties to hold Orban accountable.”

Fidesz seems to believe that their enemies in the last war, ”the lefties”, are also their enemies in the next war. They are unaware that a new and far more dangerous enemy, the people, is emerging.

The people is beginning to realize that Albanian salaries, African hospials and Afganistani indoctrination schools are all the Fidesz governnment in its Sicilian wisdom will give them.

People are getting hungry and they can’t eat stadiums. People will rather die at home than enter a hospital. Parents know that their children have no future without real education. The steam is building up and demonstrations will occur. When the first shot has been fired by a trigger-happy militia man it is GAME OVER. Fidesz and all traces of it will be erased from the surface of the Earth by the people.

Guest

In a way our Fidessz trolls (sometimes I wonder if it’s just one person …) are really funny- they always tell the same story:
O is invincible, the “leftists” have no chance, nothing will change …
Why then do they bother to write and repeat their mantra here again and again?

Janos Magyar
Guest

Yes, these are trolls, but they have some points. I agree that the Hungarian liberal opposition is in total disarray when Orban is already campaigning (essentially), Orban has several hundreds of thousands of loyal voters from abroad who are regularly left out of the equation by opposition-leaning observers and so on.

The situation of the opposition is much worse than what would seem from the comments of this blog.

I agree that many especially in Budapest are fed up with Fidesz – but whether this will be enough to bring the perpetrators to court or to change the Basic Law (especially given the rigged election system) is a very very big if.

Orban is still dangerous and I would never discount the resilience of a dictator. They are much more resilient and resourceful than what most people believe and the damage they inflict is much more long-term.

spectator
Guest
Pay attention please to the (circumstantial) evidence that obviously the ‘voters from abroad’ going to be different this time than who they were in ’14. Now the fokus on the ethnic Hungarians of Vojvodina, and for good reason. You see, the Transylvanians were grossly abandoned by Orbán and they know it too. Someone who fighting for the disbandment of the Schengen treaty, hence once more separate the pre-Trianon areas from the mainland just isn’t really their friend — he just couldn’t be. Our dear Viktor quite aware of the situation, otherwise tell me another good reason why to give that 50 billions to Vojvodina in the time of inland miseries of healthcare and education? At the main time you may count the votes from Burgenland too, if we are at it, why don’t you? There is a sizeable Hungarian minority with ethnic ties, (actually I know, because one of the places still named after my family, happened to be their dominium) and somehow not much attention being paid to the mainland Hungarian madness — or I missed the queuing people for Hungarian citizenship, over there? Buying votes isn’t that new by itself. Having to give away citizenships for votes is… Read more »
Observer
Guest

I/we see the problems too, but once recognized and taken into account they become irrelevant in a way:
we have to do our bit in the fight against the Orban mafia to the best of our abilities. That’s it.

Who knows what will be the outcome of the next battle, but whatever it is my love for freedom, civilization, etc. etc. will remain and my opposition to the/any immoral and criminal regime will continue. Simple.

Orban delenta est.

spectator
Guest

Almost OT, or partly OT, but anyhow:
I happened to stumble upon this blog, even more interesting, this article:

http://kolozsvaros.com/2016/04/28/level-a-hulye-kommentelohoz/

I haven’t the time, nor the mood — neither the means — to translate it from Hungarian, sorry folks, but this is one of the most reasonable assessment of the present situation in my opinion what I have met out there in the digital jungle.
I like it, for short.

The title says “Mail to the stupid commenter” — but I’d truly recommend it to all our dear nazi friends who support the Orbanist regime of Hungary.

May learn something between two curses, who knows?
Stranger things happened over there already, and many more to come.
Stay put and watch!

Observer
Guest

Tnx. Good listing of the heartless, inept and criminal deeds of the orban gang.
Try Balint Magyar’s – The Hungarian Mafia State.

Observer
Guest

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