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

roddydogs

-So why are Kaupthing not in the same situation?

noh

roddydogs wrote: »

-So why are Kaupthing not in the same situation?

Kaupthing in the UK was regulated by the FSA and covered by the FSCS.

It was declared in default and all its savings business transferred to ING.

8 Oct 2008 ... Embattled Icelandic banks Kaupthing Edge and Heritable Bank have handed over all of their UK customers to Dutch bank ING.

http://www.thisismoney.co.uk/savings-and-banking/article.html?in_article_id=454063&in_page_id=7

and the Statutory Instrument

"The Kaupthing Singer & Friedlander Limited Transfer of Certain Rights and Liabilities Order 2008"

http://www.opsi.gov.uk/si/si2008/uksi_20082674_en_1

StevieJ

Rollinghome wrote: »

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

Or the Wail

StevieJ

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.

The Icelandic govt reinbursed home savers for the full amount which by international/eec law meant they had to treat all savers equally.

noh

StevieJ wrote: »

The Icelandic govt reinbursed home savers for the full amount which by international/eec law meant they had to treat all savers equally.

But as I said above the £2.3Bn is the amount of their original guarantee.

The total compensation that will be paid by the FSCS is estimated to be around £4.4Bn.

So Iceland is clearly not being asked to cover the full amount and the loan agreement confirms this.

StevieJ

A majority of Icelandic voters would approve a law to reimburse the U.K. and Dutch governments for losses in a failed online bank, but even more would prefer to see the so-called Icesave bill withdrawn and negotiations reopened, a recent survey found. The survey conducted by Nordic business consultant Capacent Gallup found that 53% of respondents would vote to approve the bill in a referendum, 41% would vote against it and another 6% would vote blank.

tradetime

StevieJ wrote: »

A majority of Icelandic voters would approve a law to reimburse the U.K. and Dutch governments for losses in a failed online bank, but even more would prefer to see the so-called Icesave bill withdrawn and negotiations reopened, a recent survey found. The survey conducted by Nordic business consultant Capacent Gallup found that 53% of respondents would vote to approve the bill in a referendum, 41% would vote against it and another 6% would vote blank.

That's interesting, do you have a link to the full article on that, as it is somewhat different to what the popular vultures er I mean media seemed to be pumping yesterday.

Nukumai

tradetime wrote: »

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

tradetime - Wrong...by your definition, most businesses that fail could qualify as Ponzi schemes.

In fact, a Ponzi scheme is merely an operation that fraudulently takes money from Peter to pay Paul. But, in order to maintain the illusion, a Ponzi scheme must constantly attract fresh incoming funds; in order to do this they are forced to offer higher and higher (artificial) investment returns. It is at this stage (assuming the initiator hasn't already run off with the money) that they tend to attract attention and get found out.

And, of course, not all Ponzi scams start out with the intention of being a fraud (including Charles Ponzi's own business ventures).

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.

A defining characteristic of a Ponzi scheme is an act of fraud. Legitimate pension schemes are not, of course, a fraud.

They were just more greedy banksters who got overleveraged and bet big on products they didn't understand,

Wrong. The Icelandic banks were not materially involved in toxic derivatives or sub-prime mortgage assets, unlike many European and Nth American institutions. Their problem (in simple terms) was their relative size, compared to the Icelandic economy. Regarding the higher interest rates they were offering...when market liquidity dried up they were forced to offer higher interest-rates to attract fresh deposits, in order to fund themselves.

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

Correct to an extent. Although, of course, there needs to be a political willingness along with the economic capability.

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.

"Dodgy financial instruments" had almost nothing to do with it (not directly).

Whilst the situation is obviously complex, Icelanders were happy to maintain a level of per capita personal debt much greater than that of the UK or the US, and to rely on domestic inflation to provide their investment returns. Moreover, many individual homeowners had mortgages denominated in EUR or JPY; a potential disaster waiting to happen when you consider how precarious a small currency such as the krona is to collapse under crisis.

Remember, too, that Iceland was running a significant GDP deficit for an economy of its nature, being a reflection of the population's desire to import consumer goods on credit.

They were more than happy to reap the benefits during the good times, but are now not wanting to meet their moral and legal obligations. Remember, people were skeptical about depositing funds with the Icelandic banks...but there were many reasons to alleviate these concerns...not least being the Icelandic Govt stating that it would rescue any local bank that found itself in trouble.

And don't misunderstand me...I was, and remain, horrified that the bullying UK govt applied Anti-Terrorism legislation in order to freeze Icelandic assets, and I have a real sympathy with Icelanders due to the situation they find themselves in.

StevieJ

tradetime wrote: »

That's interesting, do you have a link to the full article on that, as it is somewhat different to what the popular vultures er I mean media seemed to be pumping yesterday.

Here is another with a link.

Jan. 6 Capacent Gallup poll showed voter opposition to the bill may be thawing. According to that poll, 51 percent of Icelanders now disagree with Grimsson's veto, compared with 41 percent who back his decision. Fifty-three percent of voters plan to back Icesave in a referendum, the Gallup poll, published by broadcaster RUV, showed. RUV gave no margin of error.


http://www.businessweek.com/globalbiz/content/jan2010/gb2010017_381932.htm

tradetime

tradetime - Wrong...by your definition, most businesses that fail are Ponzi schemes.

In fact,a Ponzi scheme is merely an operation that fraudulently takes money from Peter to pay Paul. But, in order to maintain the illusion, a Ponzi scheme must constantly attract fresh incoming funds; in order to do this they are forced to offer higher and higher (artificial) investment returns. It is at this stage (assuming the initiator hasn't already run off with the money) that they tend to attract attention and get found out.

And, of course, not all Ponzi scams start out with the intention of being a fraud (including Charles Ponzi's own business ventures).

You mis-understand, my point was that if you define the Icelandic Bank as running a Ponzi scheme then you would have to define all failed businesses that operate by paying out income before they earn it as Ponzi, including pension schemes. Obviously they are not, neither the Icelandic Banks, nor most businesses either set out to, or arrive at this stage and then continue to defraud.

The rest of your critique may be valid, but I would have to spend some time reading it to respond.