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

StevieJ

baby_boomer wrote: »

I don't know about Iceland's culpability, but MSE allowed some pretty aggressive pro-Icelandic posters to knobble any negative thoughts about Icelandic savings.

You stuck your head above the parapet on these boards at your peril.

But some of the anti Iceland posts were a moronic disgrace :eek:

Nukumai

noh wrote: »

Which was not "anti terrorism legislation" as has been highlighted several times. The legislation used was part 2 of the Anti-terrorism, Crime and Security Act 2001 which as you can see covers more than terrorist acts. The treasury believed that action to the detriment of the Nations economy was about to be taken so issued this Statutory Instrument

However you choose to dress it up, the powers exercised against the Icelanders were powers available within the terms of Anti-Terrorism legislation. In fact, Treasury had Landsbanki on its list of 'proscribed' groups.

Here's how the BBC reported it :

"Landsbanki was listed on the Treasury website as a proscribed regime alongside al Qaeda, the Sudan and Lebanon."

http://news.bbc.co.uk/1/hi/uk_politics/7688560.stm

And, you will recall that the general public reaction was resoundingly negative. There was even an online petition launched in the wake of this publicity. And guess what :

"Shortly after the petition was launched, the bank was removed from the list and categorised under 'asset freezing measures not related to terrorist or country-based financial sanctions'."

- same BBC article.

As was repeatedly pointed out to the govt when they were rushing this ill-conceived piece of legislation through Parliament...mixing up all manner of statutory provisions under one statutory title (eg. 'Anti-terrorism, Crime and Security Act') is bad law and a disaster waiting to happen.

Another interesting take was from the Center for Economic Policy Research. In a briefing written jointly by a Professor of European Political Economy at LSE and Head of the School of Economics, Mathematics and Statistics at Birkbeck College they wrote :

"In addition, outrageous bullying behaviour by the UK authorities (who invoked the 2001 Anti-Terrorism, Crime and Security Act, passed after the September 11, 2001 terrorist attacks in the USA, to justify the freezing of the UK assets of the of Landsbanki and Kaupthing) probably precipitated the collapse of Kaupthing – the last Icelandic bank still standing at the time. The official excuse of the British government for its thuggish behaviour was that the Icelandic authorities had informed it that they would not honour Iceland's deposit guarantees for the UK subsidiaries of its banks. Transcripts of the key conversation on the issue between British and Icelandic authorities suggest that, if the story of Pinocchio is anything to go by, a lot of people in HM Treasury today have noses that are rather longer than they used to be."

[Center for Economic Policy Research - POLICY INSIGHT No. 26
The Icelandic Banking Crisis and What to do About it]

Now, we are not likely to change each other's minds on this one, and - as you say - the topic has apparently already been beaten to death here.

Either way...I'm happy that we agree to disagree.

Nukumai

tradetime wrote: »

I also sympathize with the Icelandic people very much so, and we shouldn't consider ourselves immune from their fate either. However I disagree with your horror, firstly the Icelandic government made it quite clear, literally in a statement, "that they were looking after their own" "it was every man for himself" Secondly the legal clauses of the "Anti-terrorist Bill" in question do not pertain solely to terrorism, but it makes better press to lead with that.

Thanks for the response, which I won't debate point-by-point, because I think we are probably not too far apart in our views, anyway.

Besides, judging by a couple of earlier posts...I'd possibly (unecessarily) stir up a hornet's nest that we could all do without

Rollinghome

baby_boomer wrote: »

I don't know about Iceland's culpability, but MSE allowed some pretty aggressive pro-Icelandic posters to knobble any negative thoughts about Icelandic savings.

You stuck your head above the parapet on these boards at your peril.

There was some interesting psychology going on wasn't there? A state of denial as if some thought if they'd be safer if they could get others to do the same as themselves. Even blaming the UK government for stepping in. Now that is very similar behaviour to the victims of ponzi scams: 'victims' can't believe it' - (apologies for repeating the link.)

A PR bod from the bank was even supported and allowed to use this board to promote its story.

What they didn't take into account aside from the numbers was the political aspect of not having a vote in the country with a population the size of Croydon that was responsible for much of the guarantee and the likely consequences of that. A lot of people could have been hurt very badly had the UK government taken a less supportive line.

noh

Originally Posted by Nukumai
However you choose to dress it up, the powers exercised against the Icelanders were powers available within the terms of Anti-Terrorism legislation. In fact, Treasury had Landsbanki on its list of 'proscribed' groups.

The powers that were used were from a piece of legislation which you rightly say mixed up all sorts of statutory provisions under one title.

But as stated in the BBC story you linked to:-

A Treasury spokesman said the government did not consider Iceland or its banks as terror regimes.
He told BBC News: "The government froze the assets of Landsbanki in the UK as a precautionary measure to ensure UK creditors are treated fairly.

"The order was made under a power contained in the Anti-Terrorism, Crime and Security Act 2001, however it was not taken on the basis of the anti-terrorism provisions in the Act. "

The comments concerning the UK Treasury actions in the report from the CEPR are opinion.

But even that report says:-

"The main message of our paper is, however, that it
was not the drama and mismanagement of the last
three months that brought down Iceland's banks.
Instead it was absolutely obvious, as soon as we began,
during January 2008, to study Iceland's problems, that
its banking model was not viable. The fundamental
reason was that Iceland was the most extreme example

in the world of a very small country, with its own currency, and with an internationally active and internationally

exposed financial sector that is very large relative

to its GDP and relative to its fiscal capacity."

So we do disagree.

StevieJ

Rollinghome wrote: »

There was some interesting psychology going on wasn't there? A state of denial as if some thought if they'd be safer if they could get others to do the same as themselves. Even blaming the UK government for stepping in. Now that is very similar behaviour to the victims of ponzi scams: 'victims' can't believe it' - (apologies for repeating the link.)

A PR bod from the bank was even supported and allowed to use this board to promote its story.

What they didn't take into account aside from the numbers was the political aspect of not having a vote in the country with a population the size of Croydon that was responsible for much of the guarantee and the likely consequences of that. A lot of people could have been hurt very badly had the UK government taken a less supportive line.

The point was the Icelandic bank was protected as if it was a UK scheme so provided they had no more than 35k they would receive most of their money back.
The first 15k was always irrelevant to the consumer as the compensation scheme was worded so that the scheme would cough up if Iceland defaulted.

Nukumai

noh wrote: »

"The order was made under a power contained in the Anti-Terrorism, Crime and Security Act 2001, however it was not taken on the basis of the anti-terrorism provisions in the Act. "

A cynic might question the veracity of the Treasury statement (the CEPR briefing is not so trusting of Treasury's recollections)

The report from the CEPR

"The main message of our paper is, however, that it was not the drama and mismanagement of the last three months that brought down Iceland's banks. Instead it was absolutely obvious, as soon as we began, during January 2008, to study Iceland's problems, that its banking model was not viable. The fundamental reason was that Iceland was the most extreme example in the world of a very small country, with its own currency, and with an internationally active and internationally exposed financial sector that is very large relative to its GDP and relative to its fiscal capacity."

I agree with every word, and briefly stated similar sentiments in an earlier posting. Even the Icelandic authorities had long previously recognised the systemic problems in their banking system - they even stated at that time that the thought of a banking crisis was their worst nightmare.

So we do disagree.

Happy to.

Rollinghome

StevieJ wrote: »

The point was the Icelandic bank was protected as if it was a UK scheme

http://www.guardian.co.uk/money/2008/oct/07/savings.banks1 :

"The UK's FSCS confirmed today that it is only responsible for "top-up" payouts to customers of Icesave.

It said this afternoon it was only gearing up to cover amounts over and above the €20,000 (£16,264) protected by the Icelandic government's deposit protection scheme.

This means that if the Icelandic government was unable to meet its obligations to UK savers they would only get back any holdings between €20,000 and £50,000."

noh

Originally Posted by Nukumai
A cynic might question the veracity of the Treasury statement (the CEPR briefing is not so trusting of Treasury's recollections)

A cynic may also question the opinions expressed in the CEPR report concerning the UK Treasury as one of the authors, Anne Sibert, is a member of the Monetary Policy Committee of the Central Bank of Iceland.

Edit:
Disregard that she wasnt appointed to that position until March 2009.
I guess the opinions expressed may have helped her future job prospects in Iceland.
http://eng.forsaetisraduneyti.is/news-and-articles/nr/3464

StevieJ

Rollinghome wrote: »

This means that if the Icelandic government was unable to meet its obligations to UK savers they would only get back any holdings between €20,000 and £50,000."

I think it would have made an interesting court case I think the wording was up to 35k less any compensation from the Iceland scheme (now if you don't receive any compensation). Maybe they didn't understand their own scheme wouldn't surprise me.

[FONT=verdana,arial,helvetica,sans-serif]The Financial Compensation Net[/FONT][FONT=verdana,arial,helvetica,sans-serif]If you are worried about safety, the Financial Services Compensation Scheme (FSCS) is designed to safeguard your money. If your bank were to go bust, the first £35,000 of your savings per UK financial institution would be protected in full.[/FONT][FONT=verdana,arial,helvetica,sans-serif]In respect to Icelandic accounts, Kaupthing Edge deposits are currently held by UK company Kaupthing Singer and Friedlander Ltd, and qualify for the maximum protection of £35,000 under the scheme. This is the same for FBN and ICICI bank.[/FONT][FONT=verdana,arial,helvetica,sans-serif]Money held in the Icesave savings (currently paying 6.05% on balances from £1) falls under slightly different rules, as the account is initially covered under the Icelandic Deposit Guarantees and Investor-Compensation scheme. This means that the first €20,887 (currently £16,398) is protected in full by Iceland's regulator.[/FONT][FONT=verdana,arial,helvetica,sans-serif]However, savers also have a further guarantee under the FSCS, which offers 100% of the first £35,000, minus any payments made under the Icelandic scheme. [/FONT][FONT=verdana,arial,helvetica,sans-serif]Either way, these accounts have exactly the same protection as UK deposits.[/FONT][FONT=verdana,arial,helvetica,sans-serif]Take advantage of the fact that because of the credit crunch, banks are eager to get their mitts on your cash at the moment. And as long as you stay under the £35,000 compensation limit, your savings will be fully protected.[/FONT][FONT=verdana,arial,helvetica,sans-serif]And finally, don't be put off by the gloomy headlines about the credit crunch. After all, your money won't earn any interest if it's hidden under your mattress.[/FONT]