By Beatriz Lecumberri of AFP
President Hugo Chavez set off panic in Venezuela's financial system with the closure of a string of banks and the detentions of bankers, in a crackdown including his wealthy allies.
But many observers said the firebrand socialist leader sought to clean up the sector, rather than to nationalize it, with an eye on legislative elections next year.
Authorities last week closed seven small private banks, representing eight percent of the nation's deposits, citing financial irregularities.
Prosecutors also issued 30 arrest warrants and 15 travel bans to bankers.
"There were irregularities committed with public funds and banks were not supervised as they should have been," economist Jose Guerra told AFP.
"They were little banks governed by large crooks," Chavez said, as well as threatening to nationalize the entire banking system if bankers did not obey the law.
The scandal was the first serious rift between Chavez and a group of businessmen who have grown wealthy from deals with, or allowed by, his government.
They are known as the "Boli-bourgeoisie," a play on the name of Simon Bolivar, the Latin American liberation hero worshipped by Chavez.
The most spectacular arrest targeted the brother of cabinet minister Jesse Chacon, a close Chavez ally who later stepped down.
"There's no sacred cow," Chavez said, calling on his supporters to "tighten the moral belt" and to set an example of transparency and honesty.
Concerned customers, fearful of more closures, lined up to collect their money outside private banks, while investors initially dumped Venezuelan bonds and the Bolivar currency as financial markets reflected their concerns.
"The president's speech wasn't very prudent," economist Pedro Palma told AFP.
Chavez later sought to calm nerves by underlining the solidity of the private sector.
The leftist leader met with the main private bankers on Monday and called on large financial institutions to help the state pay the deposits of savers hit by the bank closures.
Tackling corruption is a key challenge for Chavez during current hard times in Venezuela's oil-dependent economy, and ahead of legislative elections next year, said Domingo Maza, former director of Venezuela's Central Bank.
"Chavez doesn't need to nationalize banks to control them," Maza said.
The move signaled, however, that the Chavez government was still pushing ahead with its socialist finance system -- which was boosted with the purchase of the Banco de Venezuela from the Spanish Santander group this year.
The government currently controls around 26 percent of the banking sector.
"The State is becoming bigger but also more vulnerable because the value of the taken banks is equal to zero," economist Guerra said
President Hugo Chavez set off panic in Venezuela's financial system with the closure of a string of banks and the detentions of bankers, in a crackdown including his wealthy allies.
But many observers said the firebrand socialist leader sought to clean up the sector, rather than to nationalize it, with an eye on legislative elections next year.
Authorities last week closed seven small private banks, representing eight percent of the nation's deposits, citing financial irregularities.
Prosecutors also issued 30 arrest warrants and 15 travel bans to bankers.
"There were irregularities committed with public funds and banks were not supervised as they should have been," economist Jose Guerra told AFP.
"They were little banks governed by large crooks," Chavez said, as well as threatening to nationalize the entire banking system if bankers did not obey the law.
The scandal was the first serious rift between Chavez and a group of businessmen who have grown wealthy from deals with, or allowed by, his government.
They are known as the "Boli-bourgeoisie," a play on the name of Simon Bolivar, the Latin American liberation hero worshipped by Chavez.
The most spectacular arrest targeted the brother of cabinet minister Jesse Chacon, a close Chavez ally who later stepped down.
"There's no sacred cow," Chavez said, calling on his supporters to "tighten the moral belt" and to set an example of transparency and honesty.
Concerned customers, fearful of more closures, lined up to collect their money outside private banks, while investors initially dumped Venezuelan bonds and the Bolivar currency as financial markets reflected their concerns.
"The president's speech wasn't very prudent," economist Pedro Palma told AFP.
Chavez later sought to calm nerves by underlining the solidity of the private sector.
The leftist leader met with the main private bankers on Monday and called on large financial institutions to help the state pay the deposits of savers hit by the bank closures.
Tackling corruption is a key challenge for Chavez during current hard times in Venezuela's oil-dependent economy, and ahead of legislative elections next year, said Domingo Maza, former director of Venezuela's Central Bank.
"Chavez doesn't need to nationalize banks to control them," Maza said.
The move signaled, however, that the Chavez government was still pushing ahead with its socialist finance system -- which was boosted with the purchase of the Banco de Venezuela from the Spanish Santander group this year.
The government currently controls around 26 percent of the banking sector.
"The State is becoming bigger but also more vulnerable because the value of the taken banks is equal to zero," economist Guerra said
