The state-run Icelandic Housing Finance Fund was by far the biggest depositor in Straumur Burdaras investment bank, which was taken over by the FME financial regulatory body yesterday morning, it has now emerged.
“I won’t give an exact figure, as that is not the done thing in these circumstances, but it equates to billions (of Icelandic kronur),” Housing Fund head Gudmundur Bjarnason said to mbl.is. If Straumur’s assets do not cover the deposits, the government’s possible losses (because of deposits in Straumur) might prove to be substantial, wherever they end up placing it in the government’s books.
Bjarnason says that it is the fund’s responsibility to hold enough liquid funds to answer its obligations with regard to paying out loans and for expected costs. The fund has always invested this money to earn interest in investment funds, state bonds or in the Central Bank. A part of this money was invested in Straumur, he said.
Sources indicate that the pension funds were also large depositors in Straumur, but they declined to confirm that on Monday evening.
So, pardon my primitive cognitive abilities; what does this mean, practically speaking? What would it mean if the pension funds were also involved in Straumur?
My uneconomic and my absolute lack of logic thinking abilities make me hungry for an coherent answer, if such a thing exists..
Cheers from a foreigner trying to grasp the implications of the crisis, on the human level. If anybody has sources for information (psychological/sociological context, like research papers or anything similar), feel free to pass them on!
Thanks in advance
The HFA is a profitable state owned mortgage provider.
Their investment in Straumur is at serious risk.
Same applies to the Union pensions.
Could well have to be written off.
The Unions have diversified investments so it will only represent a small %.
The Trade Unions have managed their funds well enough, maybe they should have run the Banks and the Economy as well.
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We were victims of Straumur as a supplier; after they ordered various services form us earlier this year and failed to pay; we were informed that as we had not responded to the add they placed in the Times and FT (if only I had read the Times and FT that day?)we were now not eligbible for payment. Apparently they had not written directly to their creditors outside of Iceland and did not need too under Icelandic law.
My suggestion is not to do business with Iceland as you end with the cold shoulder – forgive the pun but humour help sometimes.