Margret Maria Sigurdardottir, Iceland’s children’s ombudsman says she is speechless that Glitnir Bank loaned millions of kronur to children to buy shares in Byr Savings Bank. She says the guilt lays both with Glitnir and the parents for indebting their own children.
Glitnir loaned 10 children younger than 17 for initial capitalisation investment in Byr. The loans were a breach of the law, as it is illegal to loan to children without the express permission of the District Commissioner.
Sigurdardottir asks anyone with further examples of similar cases to get in touch with her.
http://barn.is/barn/adalsida/english/
The children must be with credits too. What a brilliant idea: Born to be a slave (or born to be consumer).
More info.
Visir:
Ten children, the youngest one year, receiving loans of this kind in 2007. Most are children of guarantee capital holders in Byr. The loans amounted to from 2 and up to 24 million.
DV:
Einar Örn Jónsson, father of two children treated Bullet loan from Glitnir to acquire capital in Byr in 2007
BTW, Google translates “Reykjavik” as “Jakarta” :) .
Found another article on DV. It’s hard to follow the translation, but it looks like there was a link between the loans and the Nóatún group. Also, looks like the loans were ~200k euros each.
http://www.dv.is/frettir/2009/11/2/freistandi-ad-taka-lan-fyrir-bornin/
So in stead of robbing foreigners Glitnir decided to rob children.
Speechless is the correct word.
I hope that finally some tough penalties will be given to the commercial masterminds who came up with this idea.
At the risk of spamming this thread, Dadi has a detailed entry on this:
http://www.economicdisasterarea.com/index.php/news/children-borrowing-money-from-glitnir/
The bottom line looks, as he says, familiar:
“The tragic thing is that the parents of the children will have the loans written off. So they would have reaped the benefits and not assumed the risk. A familiar theme in Icelandic banking these days.”
“So in stead of robbing foreigners Glitnir decided to rob children”
Not really, as children aren’t liable for losses. It’s more appropriate to think of this as an Icelandic scam (perpetrated by parents and abetted by banks) to invest other people’s money (mainly foreign depositors) and keep any profit but not have to pay losses. It’s a surprise that Iceland didn’t expand on this ruse before: simply appoint children to all senior government and regulatory positions to avoid ever having to repay anything!
The mind reels …
“Not really, as children aren’t liable for losses. It’s more appropriate to think of this as an Icelandic scam (perpetrated by parents and abetted by banks) to invest other people’s money (mainly foreign depositors) and keep any profit but not have to pay losses.”
Thats correct, the bank must have been fully aware of it and allowed the fraud tom go ahead.
When do icelandic assets start to become attractive for foreign investors? and how can a foreign investor gain access to the icelandic market?
To make this legal the parents needed permission from the sheriffs office, they asked for it but it was rejected, whitout that paperwork the banks were not allowed to make the loans, so every one involved knew this was illegal from the start,
every one in Iceland under 18 must have a permission from the sheriffs office to be registered as a owner of property, like cars, houses, shares etc, same goes for loans,
the cost because of this fraud will probably fall on me, and the rest of Icelanders
“When do icelandic assets start to become attractive for foreign investors? and how can a foreign investor gain access to the icelandic market?”
The currency is artificially high so assets are expensive. I saw second hand cars, supposedly at a great discount, that were greater than the UK new price.
Jim said:
“It’s a surprise that Iceland didn’t expand on this ruse before: simply appoint children to all senior government and regulatory positions to avoid ever having to repay anything!”
Children have been running things here for twenty years, Jim.
And every new appointment continues the tradition.
They’re too young even to plead insanity when they are threatened…
“When do icelandic assets start to become attractive for foreign investors?”
If you knew that, you’d make a killing! But newly-privatised energy resources could be worth snapping up soon, despite the unfavourable investment climate.
“and how can a foreign investor gain access to the icelandic market?”
Via Iceland’s new mechanism of registering your investment, so you can subsequently obtain authorisation to realise it.
jim – once the currency floats at a market level there could well be opportunities such as the one you mention. but as a UK based retail investor, how can i practically go about trading Iceland listed equities? do you think that is a service which UK brokers can provide. if you can point me in right direction that would be very helpful.
stephen – Which ICEX equity do you think offers good value at the moment? Also bearing in mind the risk of the krona dropping when Iceland’s currency restrictions are removed…
Very nice – 24 million ISK /10 children – roughly £10,000 or euro per child?
Sort of a pre-student loan…
>Very nice – 24 million ISK /10 children – roughly £10,000 or euro per child?
That’s actually **up to** ISK 24m per child.
Don’t forget that the loans were made a while ago, probably in 2006? The exchange rate then was something like 80-90 ISK:EUR. So up to 300k euros per kid.
Sweet :) .
This aparently involves 10 children and they parents.
Their parents requested permission from Reykjavík District Commissioner and it wasn’t granted ( not a surprise there ) but then the bank manager did decide to go ahead any way.
http://www.icelandreview.com/icelandreview/daily_news/?cat_id=16539&ew_0_a_id=351421
Birna Einarsdóttir as a top manager allowed it though further puts to rest the propogada that woman managers did ( and do ) take less risks.
If example of other bank Kautphing’s business unit New Bond Street Asset Management ( managed by women) did not already have put that stupid sextist idea to rest.
This ladies was the only ones that gave exposure to sub-prime loan of Icelandic banks when New Bond Street Asset Management did implode with losses to Kaupthing in 2007.
It was only Kaupthing that had this division, not Glitnir or Landsbanki. Kaupthing ate they losses thanks to the lady ( and rating agencies) and moved on.
BYR Savings and Loan which was merged local savings and loans in Reykjavík area was rich source for Jón Asgeir and he did engineer that he would acquire them in this way from 2006 on.
And after in the process he did get the managers to increase the equity of it. One way was to offer existing owners of BYR ( the stofnfjáreigendur — shareholders ) to buy more shares ( with understanding that there would be dilution other wise ). And to sweeten that offered were loans to buy it.
And to encrourage ( if that the word ) these BYR shareholder to do it they did accept shares themsleve as collaterel. This was in the period of consolidation and did BYR get Krona 26 billions of capital in this way where money loaned was from Glitnir.
Now, some of these shareholders ( this being a local Saving and Loan ) where children who had account there and were bought they shares in the Saving and Loan as a gift by other family member.
So District Commissioner ( as is the law ) was asked if this loans would be agreed to, as they did on surface when this was done look like a good deal.
But District Commissioner said NO. Not unless you give legal binding agreement that if value of borrowed share did drop below level guaranteeing loan then of course there would be no other asking of guarantees against it from children or parents.
But this was not given by Glitnir.
Now this shares of course did increase in value ( and BYR did pay nice dividends to the shareholders from its coffers) and was in September 2008 almost merged with Glitnir but of course that never completed because Glitnir did not get it refinancing of roll over loans in international markets and was to be taken over 28th Sept 75% by Icelandic state ( of course events did over take that ).
>“The tragic thing is that the parents of the children will have the loans written off. So they would have reaped the benefits and not assumed the risk.
This is something that of course I am not in approval of — but in this case of this 10 loans did Glitnir act criminally. But the write off is not large because of it.
The rest of the controversy is of the adults who also do not have protection and Glitnir is coming after they now the share price has dropped.
All BYR shareholder did make good money in getting paid they dividends. So it is only write they should be gone after ( within reason ).
If BYR had merged with Glitnir then of course value would have been created for the share holder ( which of course was Jón Asgeir but also the original shareholder of BYR too. )
Jim did write :
>Not really, as children aren’t liable for losses. It’s more appropriate to think of this as an Icelandic scam (perpetrated by parents and abetted by banks) to invest other people’s money (mainly foreign depositors) and keep any profit but not have to pay losses.
As said it is 10 children, which is quite a large number of the original stofnfjáreigendur — shareholder.
But what is really the issue is that this shareholder are not protected by collateral of they shares for the loan. Glitnir can go after they other asset to to get loan back.
( Within reason. )
It is foreign banks and bond holder that is the loser here but again, they did enter into they loans with they yes open — as professioanl corporate investors with they risk departments.
Who wants to lose money. Nobody.
But this huge explosion of money seeking risk abroad for decent returns out of US and EU member state like UK and Germany did go there because of ridiculous low interst rate policy of US and other Central Banks.
If there was not this all that money would not have gone into the hugest mess in modern world histry of subprime property in US and loans for building houses on sea shores in Spain.
And also it would not have found its ways into loans to the Icelandic banks.
>Found another article on DV.
http://www.dv.is/frettir/2009/11/2/freistandi-ad-taka-lan-fyrir-bornin/
It is good to see that the photo graphers at DV are still churning out articles to go with their pictures.
Brumley, DV is as trustable as UK Sun paper.
Maybe even less so because Sun does has * journalist * while DV has * photographers *.
>”Margret Maria Sigurdardottir, Iceland’s children’s ombudsman says she is speechless that Glitnir Bank loaned millions of kronur to children to buy shares in Byr Savings Bank. She says the guilt lays both with Glitnir and the parents for indebting their own children.”
Party poltical shots not taking into consideration — whole point Margret is that kids are * not * liable for loans.
And Glitnir risk manager team led by Birna Einarsdóttir should pay for this negligence and misfeasance out of they pockets.
“But what is really the issue is that this shareholder are not protected by collateral of they shares for the loan.”
Yes, that’s the main issue. Glitnir lent depositors’ funds to children to invest in shares and yet, if those shares crash, Glitnir can’t pursue the debtors because loans to children are illegal. Yet another innovative way the Icelandic Ponzi schemes gave away depositors’ funds.
jim – i know very little about specific ICEX securties and their potential risk/reward. my thinking is that first investigate the possibility of investing and the practicalitles involved, and then follow that up with looking for specific opportunities.
here is what i am thinking… capital in iceland is very tight and demand for foreign currency high. once the ISK floats and settles on new market rate (say EURISK 250-300), then would be the time to invest if there are any specific opportunities. i am not aware of any as have not done any research, but given the size of the bust one would imagine that equity markets are severely depressed by any value measurement. long term one would think that the equities likely to represent best value are export based companies (fishing, energy?) with hard-currency revenues. ultimatley exporting is the way that iceland will get back on its feed.
what do you think? do you know which is the most liquid ICEX security? i can then ask my broker if it is POSSIBLE to trade from here in UK.
>one would imagine that equity markets are severely depressed by any value measurement
Yep. And don’t forget what the IMF have said:
- More than 20 percent of the country’s largest companies are at a risk of bankruptcy or moratorium on their payments.
- In regard to the banks, it is believed that they have to review and even write off two of every three loans held by Icelandic companies.
- Every fifth household has a negative capital position and the percentage will rise if realty prices continue to drop
- The largest risk factor is the debt that could fall on the Icelandic state if the emergency law that was passed in October 2008 is annulled in court. In that case, ISK 620 billion (USD 4.9 billion, EUR 3.1 billion) could fall on the Icelandic state and increase its debt by 40 percent of the country’s GDP.
http://www.icelandreview.com/icelandreview/daily_news/?cat_id=28304&ew_0_a_id=351500
It’s not investment, it’s gambling!
If you do go for a fishing company (assuming that you’re allowed to as a foreigner), check its debt. PBIT is no good :) .
stephen – Check out http://www.nasdaqomxnordic.com/ and enjoy the gamble!
Jim said :
>Yet another innovative way the Icelandic Ponzi schemes gave away depositors’ funds.
You are becoming master of the smear language Jim.
I sincerely mean it when I say that this Glitnir risk manager team led by Birna Einarsdóttir should pay for this negligence and misfeasance out of they pockets. It is they that did cost this+ to Glitnir share holder and bond holder.
I do hope it comes in front of a judge sooner than later.
Just as will happen with IceSave. Those very few that did act strongly outside the law be punished. It will take a couple of years as Eva Joly states but they will be punished.
+ this bad loans to the kids worth between ISK 2 and 24 million ( USD 16,000 to 193,000, or EUR 10,000 to 120,000 ) each. So ten childrens times that is what these Glitnir managers did lose.
Stephen wrote :
>once the ISK floats and settles on new market rate (say EURISK 250-300)
Looking at all matters it is most likely to settle around 180 to 200 EUR-ISK.
I made posts before giving reasoning on that — but I cant quickly find them to give you link.
>>Yet another innovative way the Icelandic Ponzi
>>schemes gave away depositors’ funds.
>
>You are becoming master of the smear language Jim.
Well, exploiting underage legal liability is pretty innovative. And Icelandic banks were operating as unsustainable Ponzi schemes – collecting funds from increasingly expensive sources and spending them until they collapsed. And retail banking funds come primarily from depositors. So, what do you disagree with in my sentence?…
“Glitnir risk manager team led by Birna Einarsdóttir should pay for this negligence and misfeasance out of they pockets”
I blame the regulators more, for they policed the rules. And I blame the government of the time even more, for they defined the level of policing that the regulators should perform. And I blame the citizens even more than that, for they voted in the government policies that enabled all this. But every link in that chain would, of course, deny culpability…
>Icelandic banks were operating as unsustainable Ponzi schemes – collecting funds from increasingly expensive sources and spending them until they collapsed.
And that collapse did come because of a liquidity crisis when those ” whole sale ” bank to bank lending did stop after Lehman brothers did fall.
( But as warned by Davið Odsson+ this possibility was not seriously considered — and then it happend when Lehman Brothers fell. ).
+http://www.icenews.is/index.php/2009/07/01/iceland-icesave-deal-“there-is-no-plan-b”/#comment-84576
>And retail banking funds come primarily from depositors. So, what do you disagree with in my sentence?…
It is excagerated nature of what you are saying you are taking this and over spreading it, out of its proportion.
You general posts do come clearly from stance as bond holder or other whole sale lender. You clearly are propgandist of some type. But please come clean and state it where you are coming from.
As bond holder or whole sale ledner I think you have reason to be upset because depositor have been put first, but your case is not strengthen by making these smearing splash of the brush .
>>“Glitnir risk manager team led by Birna Einarsdóttir should pay for this negligence and misfeasance out of they pockets”
>I blame the regulators more, for they policed the rules.
That is nonsense as you know. Regulators depend on internal controls in all large entities like banks. There is regulations all over place in banking all over — it is most strictly regulated — and still the problems did occur. In my opinion and that of others — that because there was too much trust in regulation and rating agencies instead of common sense risk assessing. But that is what get when free money is being thrown around interest rates in big economies being ridicilously low as they were afte dot com boon ended in eight years or so ago.
Supervision under EU banking regulations ( which is all Iceland permitted to do under EEA regulation ) would not uncover something as specific as this lending you are talking about. So dont be ridiculous.
It is failure of internal bank controls in loan department. This falls squarley on shoulder of managers in the bank.
>And I blame the government of the time even more, for they defined the level of policing that the regulators should perform.
What are you talking about ? The FME ( Icelandic FSA ) did fail to supervise the systemic risk of the banks ( but they are not alone in Europe in that ). But they did follow rest of EEA ( EU ) regulations in banking as should.
>And I blame the citizens even more than that, for they voted in the government policies that enabled all this. But every link in that chain would, of course, deny culpability…
I begin to think you ignore factual commentary I give in above posts. We can blame the minority of people that did vote for New Labour as well for the state of the Northern Rock and RBS and Bradford and Bingleys too.. but that would be no more fair than what you are saying, and about as accurate.
I think you know that the Red-Green coalition is about to fall and want to try and influence with propoganda as much as can.
My earlier post did not go here it is again :
>Icelandic banks were operating as unsustainable Ponzi schemes – collecting funds from increasingly expensive sources and spending them until they collapsed.
I do find it of interst that you do describe it this way.
If you describe it this way it is best that you instead generally call it as it is:
” [many worldwide] banks [ 2001-2008 ] were operating as unsustainable Ponzi schemes ”
Assets of Icelandic banks were at least conservative in real things not like US banks in subpime or UK banks in the same and UK property bubbles or Spainish banks in coastal property bubbles..
It is simply smearing nonsense to single out Icelandic banks when they are dwarfed by one kilometer high shadows of the collosal ponzi schemse that are for example RBS and Norhern Rock in UK or the various banks in US.
But again if we start calling things ponzi schemse then social security / government pensions is biggest ponzi scheme in history ( stealing from later genrations to spend now on nice things for government now to stay in power ).
Exact opposite here in Iceland where we have responsible fully funded pension funds even if they are down in value for now.
>Assets of Icelandic banks were at least conservative in real things not like US banks in subpime or UK banks in the same and UK property bubbles or Spainish banks in coastal property bubbles.
You do understand that buying something for far more than you can sell it is no different from offering mortgages to people who can’t pay?
And that’s ignoring any deliberate asset inflation, which also occurred.
Also, it’s a bit rich that you accuse Jim of working for bondholders. What is your evidence, or do people only need evidence when they accuse an Icelander of something? :)
If everyone here is representing an agency/agenda, what is yours? Because you certainly have some pretty stong beliefs, so you must therefore also be a “propgandist of some type”.
Bromley86 said:
“Also, it’s a bit rich that you accuse Jim of working for bondholders. What is your evidence, or do people only need evidence when they accuse an Icelander of something? :)”
Well Jim is selective with blame, but mostly blames the citizens with no blame to the financial wizards who provided the container loads of cash to Icelandic borrowers:)
That would be typical of a mindset that has a condescending opinion of the citizens. The ordinary people had the least knowledge and responsibility about the great economic matters yet carry the bulk of the burden, not only of their own debt but the reckless debts of speculative gamblers.
The citizens do not have the insurance policy of a limited company.
Fundamentally the EEA policy of the separation of the regulation agency from the central bank and allowing the banks to regulate themselves was the recipe for disaster especially in a fragile economic country like Iceland.
The banks did not regulate themselves but engaged in a competitive frenzy which included
outright blatant fraud, encouraging unlimited borrowing using inflated valued assets as collateral.
We are still getting calls to take up another credit card. I tell them that I can promise to use the card but there is no way I can promise to pay you back, is that still okay?
Let the lender beware.
Fisy – You are so wrong on so many points that I think we’ll have to agree to differ. We apparently disagree on even the responsibilities of regulators, governments, etc! Do you agree that today is Friday?!
>That would be typical of a mindset that has a condescending opinion of the citizens.
Not necessarily. Jim may or may not be some sort of elitist that thinks that people are stupid.
But all Jim has said in this thread is that Icelanders have allowed their current political system to arise and survive. Certainly, it cannot be the fault of Denmark, the UK/NL or the EU that this has occurred, as the citizens of the Republic of Iceland are and always have been in charge of their own destiny.
BTW, did the EU require separation of regulators and central banks?
>not only of their own debt but the reckless debts of speculative gamblers.
Not a reference to IceSavers I hope!
“The ordinary people had the least knowledge and responsibility about the great economic matters”
Voting doesn’t delegate thinking. And ignorance doesn’t remove responsibility.
Brumely wrote :
>Also, it’s a bit rich that you accuse Jim of working for bondholders. What is your evidence, or do people only need evidence when they accuse an Icelander of something? :)
( What I said:
” You general posts do come clearly from stance as bond holder or other whole sale lender. You clearly are propgandist of some type. But please come clean and state it where you are coming from.
As bond holder or whole sale ledner I think you have reason to be upset because depositor have been put first, but your case is not strengthen by making these smearing splash of the brush . ”
There is nothing wrong with being bond holder or whole sale lender. They are people in this mess that are being hurt more than others.
That is simplest explanation for Mike’s increasingly shrill and smearing comments here. Of course he could have other reason for posting — but that is simplest explanation.
>If everyone here is representing an agency/agenda, what is yours? Because you certainly have some pretty stong beliefs, so you must therefore also be a “propgandist of some type”.
I am here reperesenting the Icelandic ideas ( which are individualist capitalistic, decentralized, rule of justic and laws not politicans ) against those who like to distort, smear and generally talk down those ideas and people here in unfair ways.
I think that pretty clearly drip from nearly every post I make.
Jim write :
>Fisy – You are so wrong on so many points that I think we’ll have to agree to differ. We apparently disagree on even the responsibilities of regulators, governments, etc!
What you mean is that you dont have refutation for what I bring up above.
If you did you would make it. You do so at length in many other thread.
Come on now, I am interested to have you refute them. And maybe some of the many that read IceNews are too.
Jim says :
>Voting doesn’t delegate thinking. And ignorance doesn’t remove responsibility.
Come on, this mindless slogans are also not substitute for meaninful explanation and debating.
While Icelandic people do watch they politicians like a hawk from a position of underlying contempt for those politicains — in comparison for other people in representatative democracies — still they are not watching and approving of every decision that the poltiicans do make ” on they behalf “.
The only way what you are saying could be true Jim is if every decision that government make is put to a referendum. And that was clearly not how current system do work.
And certainly not the way Social Democrat do like it done.
If this is system that could work in future — more of the plebicite on decisions — is good question. It is technically feasible for this to be done now as all Icelander basically has access to free Internet inside country.
And from mobile phones too.
But thing is — just how important are our elected representatives in the mediation of decision making process. Are they more qualified to make decisions than the ” mob ” of voters are?
For example judges are better qualified to make decisions on justice than a jury is, because they know more about merchanics of ensuring justice.
But is that true of elected politicians? It used to be because local communities would elect best people from their communities to represent them.
But now I am not sure that is true. Because best people generally go into business, not government. And the ones that go into politics do because they are not able to make it in the ” real world “.
As good old P J O’Rourke do say:
“Politics is the business of getting power and privilege without possessing merit.
A politician is anyone who asks individuals to surrender part of their liberty — their power and privilege — to State, Masses, Mankind, Planet Earth, or whatever.
This state, those masses, that mankind, and the planet will then be run by … politicians.”
Brumley did write :
>But all Jim has said in this thread is that Icelanders have allowed their current political system to arise and survive. Certainly, it cannot be the fault of Denmark, the UK/NL or the EU that this has occurred, as the citizens of the Republic of Iceland are and always have been in charge of their own destiny.
The government and citizens of Iceland are allowed at present to pass laws only if they do not contradict the contract we signed as part of EFTA with the EU which did create what is known in English as the European Economic Area ( EEA ). Jan the 1st 1994.
We have always kept to our side of the contract.
But the EU has not by passing this stupid horrible regulations that have ended up burdneing every Icelandic tax payer and they childrens and maybe grandchilds with this huge IceSave debt
It was the flawed idea of EU Commission burecrats give wrong features to applying EU pillar freedom of establishment idea to banks through branches concept and Directive 94/19/EC that made IceSave as big as it was :
http://www.icenews.is/index.php/2009/06/22/haarde-in-dublin-ireland-worse-than-iceland/#comment-82596
Why did the EU memberstate with power to influence these regualations with they members of the EU parliament rubber stamping these regulations not stop them ?
Denmark, Netherlands, and UK have been in EU since before these regulations where made and during the many years they were accepted and implemented.
EFTA state like Iceland did not make these regulations.
But we did fulfil our end of the EEA agreement contract and implement them to letter, in many times more quickly than EU memberstates did.
And now we must pay for it — pay for IceSave debt at the 5.5% intersest rate that UK and Holland do force us to pay.
>BTW, did the EU require separation of regulators and central banks?
No, but as led by Mr Brown as UK chancellor this did become the accepted way to do it within EU and also EFTA.
Icelandic govnernments do follow what other country in the EEA did do in this regard. We did look to the UK unde New Labour ( as did many other in EFTA and EU ) as to how to regulate.
How wrong we were.
Assuming that you’re 100% correct Fisy, you can’t get past the fact that no one prevented Iceland from preventing the problem from happening. Iceland may not have had the will or forsight to prevent the problem, but that is no one else’s fault.
You can’t with one breath say that you’re independent and that you think the EU is evil, and then with the next moan that the EU didn’t save you from yourselves. Ditto with Brown; just because a system works in a country of 60m (if it ever did), that’s no guarantee that it’s the right system for a country of 300k.
And borrow the money elsewhere at whatever rate you can get. With the ratings agencies’ help, that might even be 7%. You already know that I think that rate should have been the same as the Nordics, which will likely average >5%.