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Tuesday, January 05, 2010

We are all Icelanders now

Well, I've go to say I'm with Iceland on this one. The plucky Norse are going to have a referendum over whether to force their citizens to pay billions to the British and Dutch governments to compensate for failed banks.

Half of me wants to congratulate plucky little Iceland for its decision not to sign into law a bill to repay more than $5bn lost by savers in Britain and the Netherlands when the island’s banks collapsed. I’m an admirer of those who give the old two fingers to oppressive international pressure, and in this case in particular, Britain’s attempt to invoke anti-terrorist laws to get the money back was an absolute disgrace

[From Iceland's disgraceful decision not to pay up over stricken banks – Telegraph Blogs]

I agree. Remember how this all started?

The October 2008 collapse of one bank, Landsbanki Islands, triggered the trouble. Hundreds of thousands of British and Dutch depositors, wooed by high interest rates, had placed money with Landsbanki through an Internet arm operating in those countries called Icesave.

[From Iceland President Vetoes Icesave Compensation -]

But surely this must have come out the blue, and you can't blame people for leaving their money in these collapsing banks, since in October 2009 no-one could have foreseen their imminent default. Really? Then read this article from February 2008

That said, Kaupthing is fully covered by the UK's Financial Services Compensation Scheme. Under this, all your savings are guaranteed up to £35,000. If you have more than this with the bank, perhaps now is the time to pare your savings down and redistribute them among its high-interest paying rivals such as ICICI or Bradford & Bingley.

Of course, one of Kaupthing's main rivals is its Icelandic colleague Landsbanki, the origins of the popular Icesave account. You may also have concerns over Icesave at the moment, given the amount of print expressing concern over Iceland's banking system since the Moody's report three weeks ago

[From Could Kaupthing Edge be the next Northern Rock? | This is Money ]

Can you see the problem with compensating the people who put their money in these high interest accounts? It means that people like me who left their money in the Nationwide at 5% instead of moving it to the First Bank of the Vikings at 6% are being officially called dicks by the ruling elite. Everyone may as well take all of their money out of (for example) Barclays at 1% and put it in the Savings Bank of Upper Wazooristan at 2% and not give a shit about it because when it goes down the Swanee, poorer taxpayers will bail them out. This is madness and it was clear at the time that bailing the banksters out was wrong.

A full-scale bailout would undermine any sense of personal or corporate culpability for the risks that were taken that did not pay off. Doing so would almost guarantee repeat fiascos in the future.

[From Matthew Elliott: Taxpayers should not have to bail out banks | Comment is free | ]

Indeed. By all means go after the investment bankers, lawyers, financial advisers and executives involved with the failed institutions, but why should taxpayers have to fork out, whether Icelandic or British. The British government (ie, the British taxpayer) has just lost another TWENTY SIX BILLION POUNDS on LBG and RBS and there's plenty more to come. The people who made stupid decisions about how to run these banks have got off (in many cases literally) scot free.

Britain and the Netherlands stepped in to cover their own citizens, and then demanded the money back

[From Iceland President Vetoes Icesave Compensation -]

It was the British government that decided to exceed the deposit insurance, so I can't see what that has to do with the population of Iceland. Iceland has already agreed to honour the EU Deposit Guarantee which covers almost all retail depositors. If the British government wants to take legal action against the banks involved, it should go ahead and sue the banksters, not penalise the Icelandic public. If the Icelandic government is liable for regulating a bank that was run appallingly badly, then so is the British government, so why don't the Icelanders sue the FSA for allowing Kaupting to set up a retail operation in the UK a few months before it collapsed.

We can't send a gunboat because we haven't got any, they beat us in the last Cod War and if we send our aircraft carrier the Icelanders will just climb on board and claim asylum. One day, the saga of how they defeated Marxist lecturer Gordon Brown and Trotskyite solicitor Alastair Darling will be sung round the camp fires alongside the story of Hen-Thorir and others.

In the future, everyone will be famous to fifteen people.
[posted with ecto]

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