Did Iceland Run a Giant Ponzi Scheme to Scam British Savers?

mzqa395

http://www.marketoracle.co.uk/index.php?name=News&file=article&sid=16265

Iceland is refusing to repay the £2.3 billion that British Tax payers put up to temporarily bailout Icelandic banks operating in the UK following the 2008 Financial Crisis.

CLAPTON

probably not

noh

They are not refusing to pay the money back.
It's the repayment terms that are the issue.

Rollinghome

Is he trying to get himself a job with the Sun?

Paul_Herring

Something I've seen mentioned not a lot...

Prior to Icesave going bust, Iceland (under the so-called 'passport' scheme) only covered the first €21K or so, with the FSCS covering the remainder between that and £50K.

The Government decided to honor balances above £50K.

The £2.3 billion is the total bill for reimbursing private savers everything from £1 to however much they had saved, not the initial ~€21K for which they were initially liable. (The amount for the passport scheme is about £0.8 billion, with the difference being what the UK government stumped up over the amount covered by the passport scheme. The link describes some sort of 'gentleman's agrement' between the two countries that resulted in the £2.3bn figure.)

Rollinghome wrote: »

Is he trying to get himself a job with the Sun?

The Mail more like.

noh

Paul_Herring wrote: »

Something I've seen mentioned not a lot...

Prior to Icesave going bust, Iceland (under the so-called 'passport' scheme) only covered the first €21K or so, with the FSCS covering the remainder between that and £50K.

The Government decided to honor balances above £50K.

The £2.3 billion is the total bill for reimbursing private savers everything from £1 to however much they had saved, not the initial ~€21K for which they were initially liable. (The amount for the passport scheme is about £0.8 billion, with the difference being what the UK government stumped up over the amount covered by the passport scheme. The link describes some sort of 'gentleman's agrement' between the two countries that resulted in the £2.3bn figure.)


The Mail more like.

Is there an authourative source for this assertion?

As far as I know the £2.3Bn is to cover only the Icelandic guarantee (max of 20 odd thousand Euro per depositor)

From a google search articles at the time stated that there were around 230000 savers with Icesave UK estimated 15000 had deposits greater than £50K and total deposits with Icesave UK were estimated at £4.8Bn.

£2.3Bn is an average of around £10000 per depositor.

This http://www.fscs.org.uk/industry/latest_industry_news/2008/nov/FSCS_starts_Icesave_process/
from the FSCS website suggests the costs of compensating the amounts above £50k per depositor were £800m paid for by the treasury.
The cost of compensating depositors for the amounts between the Icelandic guarantee and £50k were £1.4Bn covered by the FSCS.

This document www.fscs.org.uk/Download.ashx?id=10201 from the FSCS on page 9 confirms the estimated liabilty of the Icelandic scheme as £2.2Bn the FSCS at £1.4Bn and the Treasury at £800m

Edit
On further searching I have found the loan agreement between HM Treasury and the Icelandic compesation scheme/ government.
On a quick read it appears the amount lent only covers the Icelandic guarantee amount plus certain costs but I may be wrong.

The document is quite big, if you wish to read it, here is the link. Page 11
http://www.island.is/media/frettir/icesace_fylgiskjol_I.pdf

tradetime

I quite like the author from Market Oracle, he does have a very good take on both economics and markets, however he does wander into areas of speculation and sensationalism from time to time.

Like "bubble" Ponzi Scheme has now become a cliche of the public / journalistic domain. If you take money from a group of clients, with the intention of using that money to generate a profit, and with the requirement to payout a steady stream of income to said clients from day one, and your plans to generate the profit fail, for all intents and purposes you will be running a Ponzi scheme since the only way you can meet the requirement to make the payments is from the clients own money. This is somewhat different than doing it with that intention from somewhere near the start of the venture. Under that way of thinking every pension scheme is a Ponzi scheme. So my answer to the question would be No, not in the true sense of what a Ponzi scheme is. The were just more greedy banksters who got overleveraged and bet big on products they didn't understand, the only difference between theirs and ours is that ours were lucky enough to still have a country capable of borrowing enough to bail them out, and possibly, just possibly a public gullible enough to let that happen.

As to the problems with repayment, that is all about politics, it is very unpopular with the Islandic public, and I can see their point, they didn't tell a bunch of incompetent banksters to borrow money leverage themselves up to the eyeballs and bet it on a load of dodgy financial instruments, so why should their taxpayer money go to pay for it. I feel the same way about our own banking system.

roddydogs

Just out of interest (no pun) what was Iceland Banks interest rate? was only about the same as Kaupthing, wasn't it?

tradetime

Well Kaupthing was an Icelandic bank but yes, the interest was decent, but nothing special, ICICI was offering better.

D1zzy

tradetime wrote: »

Well Kaupthing was an Icelandic bank but yes, the interest was decent, but nothing special, ICICI was offering better.

Kaupthing was a British bank - (according to the Iclandic PM -Radio 4 yesterday)

ICESAVE 6.7%
KAUPTHING 6.86%
ICICI 7%

tradetime

D1zzy wrote: »

Kaupthing was a British bank - (according to the Iclandic PM -Radio 4 yesterday)

ICESAVE 6.7%
KAUPTHING 6.86%
ICICI 7%

Yest it sounds like it

http://en.wikipedia.org/wiki/Kaupthing_Bank