jollyroger's picture

    Arise, ye (Icelandic) prisoners of starvation!

    By jollyroger on Sat, 04/09/2011 - 7:24pm |

    Showing more sense then their American counterparts, the voters of Iceland, purportedly staring in the face a $6,000/person personal hit, are touted to nix the volunteer victim program.

    With Ireland roiled and the Greeks in the street, a government fallen in  Portugal, how long before the Euro explodes like Glen Beck's head when Fox fired him?

     

    Class war, y'all.

    Comments

    I would be the first to admit I don't understand all the ramifications, but somehow this doesn't sound like a significant throwing off chains to me--from the BBC article:

    "The Icelandic nation has been put in a terrible situation," Reykjavik voter Helgi Sigurdsson told the Associated Press news agency. "It has two choices - both are bad. Probably a lot of people stood for a long time holding the ballot slip."


    by artappraiser on Sun, 04/10/2011 - 2:47am

    a significant throwing off chains

    In the era of hard times, we have learned to scale down all expetatioins....we are happy with what we have got.

     

    Shit, here in the good ol" they just went to the mats and prounounced it the public will to make the rich 150% whole, and package in an apology that we couldn't do any more for them this go round, but there's always tomorrow....I'd say the Icelanders look like positive Bolsheviks compared to the US body poitic.


    by jollyroger on Sun, 04/10/2011 - 4:55pm

    Bolsheviks

    Speaking of whom, apparently they chose more wisely than did we in  their presidential pick.

     

    "Icelandic lawmakers in February backed a repayment plan agreed with creditors, but the president refused to sign the bill, triggering the vote."


    by jollyroger on Sun, 04/10/2011 - 5:13pm

    Good on them.

    They rejected it. I don't blame them. It's too much. Privitize the losses, it can come out of their record busting gains.


    by Bwakkie (not verified) on Sun, 04/10/2011 - 2:25pm

     Privitize the losses

    Too late.  The British government already picked up the Iceland Banking Depositor's (Insurance) Beef a couple of years ago.  But then, those Brits are all fabians anyway...


    by jollyroger on Sun, 04/10/2011 - 4:57pm

    Sorry, did not see your blog before posting an Independent article about this over at the In the News section:

    Iceland rejects repayment deal again

    It is a great human interest story and may well be short-term foolish as so many 'experts' are claiming.   Hopefully, it will prove to be wiser in the long-term. 

    I did not read deeply into the story but it sounds like Landsbanki may have made a few too many junk loans and then sold them to banks in Britain and the Netherlands either directly or indirectly (those darn derivatives).  When the junk was revealed to be, well, junk, Britain and the Netherlands bought it from their own banks and are now pressuring Iceland to refinance,  probably at a very deep discount.  That has failed so now they will go to court to try to collect the loans in full.

    Until those borrowing and lending are held solely accountable for losses on the loans, whole societies and their economies will continue to be held hostage by financiers.  

    I am sure this has been thoroughly discussed in that small, highly-educated and homogeneous society; and, they definitely have right on their side.   If they are willing to accept the consequences, who are we to second guess them?   Go Iceland!


    by EmmaZahn on Sun, 04/10/2011 - 2:44pm

    to accept the consequences, who are we to second guess them? Go Iceland!

    Consequences, schmonsequences...

    Hasn't one of the big five (Baker, Reich, Krugman, Delong, Roubini) pointed to Iceland as the anti-Ireland, the country back to growth because they put their people ahead of the banks in the first go round? I think the only reason the British government is walking point on this is because they already bailed out their depositors in Landsbanki (god I love that name)....


    by jollyroger on Sun, 04/10/2011 - 5:02pm

    go to court to try to collect the loans in full.

    From the article you posted, answering my question below.  Apparently  it is a goveernment v. government lawsuit, and there is a forum for it.

     

    Iteresting concept,  a world court,  hmmm...


    by jollyroger on Sun, 04/10/2011 - 5:07pm

    The interesting sequel to the no vote is that the governments of Britain and Netherlands are suing....someone.  I think the government of Iceland.

    Pass the popcorn.


    by jollyroger on Sun, 04/10/2011 - 4:51pm

    The legal case will be interesting, and it'll be even more interesting if Iceland loses and the voters tell the court to shove it. I have trouble seeing how a unilateral decision by the U.K. government to bail out British depositors in a private bank translates into an obligation for the Icelandic government to reimburse the U.K.

    First, there's the question of Britain's right to interject itself into the dispute on behalf of its citizens. Iceland no doubt has its own version of the FDIC, but is there a legal commitment by the government to cover every shortfall? I dunno. In Canada, the losses for individual depositors were for decades capped at $60,000 (I believe it's risen since). What I've read suggests the Brits made all losses good.

    You're right, this needs popcorn.


    by acanuck on Sun, 04/10/2011 - 6:12pm

    I rather suspect upon more granular deconstruction it will emerge that there was some sort of treatyish undertaking at the time the Brit govt underwrote the landsbanki desposits, going to the question of who would hold the bag at the close of liquidation of landsbanki.

    We could perhaps ourselves learn a thing or two about the long term cost of "guarantees"


    by jollyroger on Sun, 04/10/2011 - 8:37pm

    They're fucked in court. Under EFTA regs they pretty clearly had a duty to guarantee deposits up to 20.000 euros. And if they don't pay up, Britain has shown they're capable of being brutal, declaring Landsbanki a terrorist organization after they defaulted, with all that implies. Iceland should look to Argentina's situation to see what will happen to them if they keep this up. I don't think they'll have the stomach for it.

    Keep in mind, it's not like they're stiffing fat-cat bankers. They're screwing over british tax-payers. And the terms of the deal are pretty lenient.

    Ireland, however... whole nuther kettle of fish, imo


    by Obey on Sun, 04/10/2011 - 6:07pm

    Presumably the decision is only enforcable if you stay in the Euro Zone, or conversely, noncompliance is punished by expulsion from the euro zone.

     Which brings us back to exploding heads and exploding monetary unions.


    by jollyroger on Sun, 04/10/2011 - 8:44pm

    They're part of the original EFTA, and now EEA, which is not part of the EU or even the Euro (currency) area. It's an agreement between the EU and the EFTA countries. And they have pretty clear obligations regarding finregs under that agreement. I don't see any way around the obligation to pay back their EU depositors on the first 20.000 at least.

    And just opting out of the EEA is suicide. The EU needs Iceland much less than Iceland needs the EU. When one or two big EU countries have an interest in an issue regarding an EFTA country, the latter gets screwed. It happened a couple of years ago regarding a fight between Switzerland and Libya, where Berlusconi decided to throw Switzerland under the bus quite unceremoniously. Iceland is much smaller and more insignificant than Switzerland. So I don't give them much of a chance.

    But even beyond that, even if they do try that, Britain and the Netherlands can freeze them out of international financial markets. Just look at what the big banks have done to Argentina for the last ten years after they defaulted and tried to renegotiate loans. The Argentinian government literally doesn't account for where their spending goes, for fear of creditors seizing assets, accounts and payments. Money transfers are secret and usually cash. Colombian drug dealers have more access to banking services for Christ's sake.

    I wish it weren't so. I'm not saying this because I have some ancient grudge against Iceland. They just are royally fucked here. No one is going to run to their rescue, and they are far far too small to take on the UK, especially in the absence of a legal leg to stand on.


    by Obey on Sun, 04/10/2011 - 8:54pm

    The government/people of Iceland are not the same thing as Landsbanki.

    That's preposterous. Just because the banks have people thinking they are more important doesn't make it so.

    Privitize the losses. So they are just like the profits. Private.

     


    by Bwakkie (not verified) on Sun, 04/10/2011 - 9:16pm

    Hey Chicken!! Lovely to see you. How ya doing!?!

    I don't want to seem like I'm defending any bank here. I'm all for Ireland screwing over the big banks. But that is a very different situation.

    Here we have an Icelandic bank - Icesave - that has gone under, and its regulator - the Icelandic government - accepted the obligation of guaranteeing deposits up to 20.000 of EU clients in order to let the bank operate there.The UK regulator was responsible for the other Icelandic bank Kaupthing that had operated through a subsidiary set up in the UK, and they aren't asking to be reimbursed for those lost deposits. The lines as to whose liabilities are where are pretty clear.

    The UK and ND authorities paid up and need to be reimbursed. It's not banks asking for money back, it's the governments. And it's of course the Icelandic bank that needs to pay what it can. Landsbanki's assets will go to paying off those creditors first. But the assets don't cover everything. So it's not like the bank is getting off easy. Nor are the bankers getting off easy - they've got pretty serious criminal trials going over there. Whatever they can't recoup from the bank and the bankers the tax-payers have to pay up. They're privatizing the losses as far as that is humanly possible, but it just isn't enough. What you have left is a bunch of tax-payers who repeatedly voted for deregulation, who owe a pile of money to other tax-payers. There is no bank left in the equation.

    When we move on to Ireland, and we will soon, then I'll be happy to beat down on the evil banker creditors. I'm just not convinced that 'default!' is the default answer always and everywhere. Sometimes, like in the Icelandic case, the creditor isn't a fat-cat banker. The british tax-payers have enough problems already, and unlike the Icelanders, they don't have unbelievably rich fish and aluminum industries to pay for everything.


    by Obey on Sun, 04/10/2011 - 9:49pm

    So this is the "fdic" of Iceland's statutory obligation rather than a virtual obligation resulting from the Brits fronting in excess of the statutory amount.?


    by jollyroger on Sun, 04/10/2011 - 10:16pm

    That's the way I understand it. And the liability - after selling off Landsbanki's assets - isn't that big. The assets should cover 90% of the debt, leaving 600 mn dollars, or 2000 dollars per capita. Not exactly torture for a rich country like Iceland.


    by Obey on Sun, 04/10/2011 - 10:32pm

    Curious then what underlies the vote?  What's to vote on?  We would  have a slam dunk against the fdic for our statutory limit...


    by jollyroger on Sun, 04/10/2011 - 10:45pm

    Funny you ask that. Congress is going to have a vote to raise the debt ceiling. And it's not quite sure it will pass either. Yet, just as with the Icelandic debt ceiling, there really is no choice. One way or another its going to happen. President Obama once upon a time took a principled stand and voted against raising the debt ceiling. And he doesn't seem insane either...


    by Obey on Sun, 04/10/2011 - 11:50pm

    hmm. check out the fact sheet linked to on this page...

    http://www.indefence.is/?m=2.2

    dunno.


    by Obey on Mon, 04/11/2011 - 12:56am

    The Money Shot:

     

    "Iceland didn’t guarantee those deposits at the time it seized the bank, as it did for domestic customers, leading to a dispute with the British and Dutch governments".


    by jollyroger on Mon, 04/11/2011 - 4:33am

    Thanks for setting me straight, pug. I appreciate it. (biiiig hug!)

    Still, when all is said and done, it seems that perhaps there is more to this then we know. If it is so cut and dried, I can't imagine the people and the President voting it down. What would be their justifiction for doing so?

     


    by Bwakkie (not verified) on Sun, 04/10/2011 - 11:12pm

    I'm betting there's some wrinkle because it's an awful lot of trouble to go to (2 refernenda) on a humbug...


    by jollyroger on Sun, 04/10/2011 - 11:20pm

    Well the president quite rightly put it up for referendum ... again, because there was so much resistance to even the revised deal. But as for the resistance of the population, I guess it just comes down to not accepting responsibility for the errors of their government. I mean, imagine Citi defaulted, and the FDIC fund ran out paying off domestic depositors, leaving nothing for overseas depositors. And, say, the US has under trade agreements provided a guarantee for foreign Citi subsidiaries' deposits of 600 billion dollars. Then congress goes and passes an appropriations bill of 600 bn dollars to pay those people off at the same time as they are gutting the whole social safety net for the most vulnerable. 

    That would be the comparable scenario. And you could imagine people deciding to take 'a principled stand' against it, even though they're eventually going to have to fork over the money. I don't know what they think will happen. Britain, for one, doesn't look like it is going to roll over. It looks like it has gone totally psycho over this, actually. Dunno, maybe I'm missing something. Icelanders are wierd...

    Big hug to you too, my dear!


    by Obey on Sun, 04/10/2011 - 11:39pm

    The Argentinian government literally doesn't account for where their spending goes, for fear of creditors seizing assets, accounts and payments. 

    Huh.

     

    I didn't know that.  It's tough to be "judgement proof" as a government.


    by jollyroger on Sun, 04/10/2011 - 10:14pm

    If you're interested there's this paper from a few months back. Solid on content though the perspective is a bit 'banker' skewed...


    by Obey on Sun, 04/10/2011 - 10:29pm

    I thought that Argentina had more or less recovered scot-free from the default...I will ask Mr. Google if I am misinformed.


    by jollyroger on Sun, 04/10/2011 - 10:20pm

    this guy and this guy are unimpressed with the downside of default, are they not?


    by jollyroger on Sun, 04/10/2011 - 10:24pm

    Thanks. I'll take a look at those. I originally cheered them on when they defaulted, but it turned out to be a lot more painful than I thought it would be. I thought the big banks would get over it and get back to business, but they turned out to be very vengeful. Like the US beating up on Cuba 60 years later. They just can't get over it...

    Maybe it all depends on one's expectations...


    by Obey on Sun, 04/10/2011 - 10:35pm

    It could be both--the seco nd article mentions leaving paraiah status in 2010... paraiah is a strong word...


    by jollyroger on Sun, 04/10/2011 - 10:43pm

    Are you saying... 


    by quinn esq on Mon, 04/11/2011 - 1:19am

    Since Asperger's has been on the radar, pause and appreciate the Boston Legal asperger's partner advising the Big L.


    by jollyroger on Mon, 04/11/2011 - 4:38am

    Bearing in mind that Spain teeters, it certainly is breathtaking how a worldwide housing bubble (theirs was worse than ours!) can cause this much trouble for this long...


    by jollyroger on Sun, 04/10/2011 - 8:43pm

    If Iceland had a branch on Wall Street Uncle Ben would have bailed them out, what's a few billion to the bloody Fed?


    by NCD on Mon, 04/11/2011 - 12:12am

    No shit, those are tiny numbers  compared to any of ours--of course, it was early in the sleighride, and back then people were more innocent about your billions and your trillions...


    by jollyroger on Mon, 04/11/2011 - 4:25am

    Was I ever wrong.   Not about Iceland's voters' choice.   That still seems wise to me.  Even more so now after losing a beautiful hour or so yesterday reading about this farce.  Since the dispute was between governments I originally assumed the irate depositors were institutional and not retail.  Well, you know what happens when one assumes.....  

    I did turn up a couple of interesting Guardian UK articles from shortly after ICESAVE suspended withdrawals that were helpful reminders of the general financial chaos at the time.

    Wednesday 8 October 2008  Icesave deposits guaranteed

    Monday 22 December 2008  Icesave customers get their money back

    Both UK and Iceland governments overreacted and, in hindsight, did foolish things.  For example, Iceland nationalised Landsbanki and some official apparently agreed to pay the first £18,000 that [UK] people lost.  While someone at UK Treasury told the Guardian, "The government will guarantee that no retail depositor will lose money as a result of Icesave's collapse.  Their money is safe and secure." and added that the guarantee extended beyond the UK's Financial Services Compensation Scheme (FSCS), which protects up to £50,000 of savers' cash.

    Those are just examples.   There were many more missteps on both sides leading up to where both are now.   This should go to court.   It must seem like sheer Nirvana for attorneys on both sides.  

    Yes, definitely farce.

     

     


    by EmmaZahn on Mon, 04/11/2011 - 9:09am

    Confusion! I came upon the opposite contention (see link above), ie, that the landsbanki deposits were NOT part of the normal govt guarantee (maybe Icesave was different??)


    by jollyroger on Mon, 04/11/2011 - 9:44am

    That link of yours is about how the government structured the guarantees as the banks assets got impaired. They rightly didn't go beyond their basic legal obligations and let foreign investors - bondholders et al - eat their losses. But there is also a lower bound to their legal obligations as regards foreign deposits. I.e. it wasn't up to them at that point - when the banks started failing - to decide to let foreign depositors get it in the neck. Their original licence to bank within the EU was conditional on them guaranteeing deposits up to 20.000 euros. They can't just opt out when the banks start going belly up.

    As an internet bank Icesave was special to that extent. Like I said above, when the Icelandic banks operated within the EU through local subsidiaries - like Kaupthing did in the UK - then the Icelandic authorities had no obligation to compensate UK depositors. Those losses were eaten by the UK authorities, because the UK authorities had the regulatory oversight over those subsidiaries. In the case of Icesave their regulator remained the Icelandic central bank.

    As for my link above, looking a bit closer at it I'll stand by my original pov. On the cover sheet they claim that the 6 bn dollar demand from the UK and the Netherlands comprises compensation for more than just the obligatory 20.000 per deposit. But then in the details you see that they concede the sum involves only losses up to that statutory limit and no more. In short, the Icelandic in defence campaign really has no leg to stand on. Their arguments are pretty weak tea if you read that fact sheet.

    So, sorry dude, I don't see too much new shit coming to light here...

    ;0)


    by Obey on Mon, 04/11/2011 - 10:05am

    There was a paragraph in the second Guardian article that piqued my curiosity:

    "Another group of savers with investments worth £698.7m opted to wait until the maturity date of their fixed-rate accounts to receive their compensation, according to the FSCS."

    I wonder how that turned out.   

    Since both articles are very specific about Iceland agreeing to cover £18,000 in losses, the question becomes what were the actual losses on the accounts after all the investments matured?  

    Icesave reminds me very much of Reserve Primary here.  Sure it broke the buck and chaos ensued but it eventually paid out 99¢ on the Dollar but it has held back some money for lawsuits and other claims that are still pending so final losses are still fuzzy.   Have Icesave's actual losses fully realized and tabulated yet?

     


    by EmmaZahn on Mon, 04/11/2011 - 10:30am

    Nice catch. probably not going to make a huge difference in the final count though.

    I think, from reading the Icelandic defence campaign's little pamphlet linked above, that the main variable now is who gets reimbursed from the sale of Landsbanki's London assets. It's not clear whether Iceland gets to pay off their debts to the UK and ND with the proceeds or whether the UK repays itself - inter alia for the deposits reimbursed above GBP 18.000 - with some portion of it.


    by Obey on Mon, 04/11/2011 - 11:15am

    I really do not know and am not sufficiently incentivized to find out; however, given the emergency government guarantees after the crash, it does make one wonder. 

    My personal preference is that governments acknowledge and accept that they are the real retail bankers and offer insured banks accounts and other services direct.  They can still offer to insure private bank accounts, just bump up insurance premiums to the levels charged by private insurers.  The way things are set up now is just an invitation for taxpayers  to be looted by sharp banksters.

     


    by EmmaZahn on Mon, 04/11/2011 - 10:07am

    Hey Jolly....

    Bill Mitchell, MMT-er extraordinaire, writes about Iceland in his latest post:

    http://bilbo.economicoutlook.net/blog/?p=14128

    Biased to his POV, which I mostly share.  Thought you might enjoy reading it.


    by EmmaZahn on Mon, 04/11/2011 - 1:10pm

    replies will be scarce for awhile--recovering from spinal cord surgery (yuck--don't ask).  can't hardly type.


    by jollyroger on Sat, 04/16/2011 - 4:37pm

    OMG! Where are you?


    by Bwakkie (not verified) on Sat, 04/16/2011 - 5:01pm

    Did you fall from the top floor of that 300 year old barn?

    Ack! Let me know if I can help.

    xoxoxoxo


    by Bwakkie (not verified) on Sat, 04/16/2011 - 5:10pm

    Latest Comments