Geir H. Haarde, the former Icelandic Prime Minister, was in a BBC HARDtalk interview last night. He was questioned especially about the blame of the financial collapse last October, communication between him and the British PM Gordon Brown and private talks with the governor of the Central Bank of Iceland, David Oddsson.
When offered the opportunity to say he was sorry, Haarde said that he didn‘t think there were any obvious single mistakes, but it was all a sequence of events.
“It’s a series of developments that took place. And I think that if you want to go into the blame business, a lot of people would have to share that blame among themselves. … When and if I say that [I am sorry], that’ll be after the result of our investigation comes out. I will take my part of the responsibility when the results are clear. And when that happens, I will do it domestically, but not on a BBC programme.”
Haarde refused to unveil whether his government received warnings from the Central Bank already in 2006 or the content of his private talks with Oddsson.
“We have been in close contact over these issues for a long time and the bank has its responsibility in regulating part of the framework here. … But who is to blame, who said what to whom, etcetera will be part of the investigation that is now ongoing. … It is clear that the central bank had information on this situation that they were not able to make public and I think there were private talks between the central bank here and their colleagues in Europe of a very serious nature”.
Geir Haarde has also described Britain’s reaction as “totally out of proportion”. He agreed that he could have had more talks and reactions to Brown‘s statements, and claims that actions of the British government were completely inexcusable, unnecessary and without warning and damaged the Icelandic economy.
>Brumly86 you shoud really show dedication to cause and read into Eurspeak of Standing facilities of ECB.
>Find it funny that you read all other things into depth — but suddenly with that reduced comprihension and reading skills cause you skim over it.
Sorry you feel that way, but I’m really not, as you imply, ignoring it just because it disagrees with my position.
The simple fact is I find it pretty confusing. For example, is Iceland a Member State or not? Of course it is not, but is it considered to be when we’re talking about the EEA? According to the only definition I could see in there it isn’t. Etc.
Which is why I asked you to make a point. If you state a position then that gives me something to confirm or deny, which is a hell of a lot easier than reading and understanding the whole structure of ECB banking. It does, to my mind, count strongly against whatever point you’re trying to make that you consistently refuse to make it.
I’m afraid I can’t comment on how well or otherwise any central banker has done as I simply don’t know. Even then, I still think my comment regarding Ingimundur stands, at least until the ECB finds itself facing a national default or similar.
>Fisy, it’s beginning to look like a conspiracy . . .theory ;) .
Brumly86 you shoud really show dedication to cause and read into Eurspeak of Standing facilities of ECB.
Find it funny that you read all other things into depth — but suddenly with that reduced comprihension and reading skills cause you skim over it.
>>Ingimundur no more likely tell lie than members of ECB
>Actually, he is.
>The ECB is not in that place (yet).
On face of two men and their publicly available history, I trust Ingimundur integrity more than Trichet.
But ask me different question if think Trichet done better job recent years than other big Central Banker like Bernanke answer of course yes. But best Central Banker so farthis era Zhou Xiaochuan. China and many asians government learn lessons from 1997 financial crisis. We live in the interesting times for sure.
I am sorry, off course I am adressing Fisy.
@Fishy
I did give this doc a read and I would be glad if you came up with some hard facts to back up your (conspircay) theory.
I can only agree on this with Bromely who is a more accurate reader than I am.
I would also like to draw your attention to the final appendix ot the document i which all kinds of penatlies are discussed for those parties who are not able to meet the obligations of the ECB.
Fisy, it’s beginning to look like a conspiracy . . .theory ;) .
What’s your point about that ECB document? You need to make one and point to your evidence. I’m happy to read it if I’m given something solid to confirm/deny.
>Ingimundur no more likely tell lie than members of ECB
Actually, he is. Iceland’s Central Bank is currently in the frame as a key contributor (perhaps even the prime one, if you take into account Oddsson in all his roles over the past couple of decades) to the total collapse of the country’s banking system.
The ECB is not in that place (yet).
Thank you comments Niels.
Did you see link to Standing facilities of ECB above? Seems to be shyness in reading of people here.
If get more sources I course tell here but I think reading of what is meant to happen give good idea.
Of course now one like to read this EUspeak written documents but won’t get to bottom of what I talking about without it.
No big grand conspiracy needed just ECB to act without using a fair hand — without or most likely with — some pressures from memberstate and you have conditions made ripe for what happen next.
Which is terrible action of Brown Darling and all that comes after that.
We can leave comments more on that Brown Darling issue I to this thread as Brumley86 say:
https://www.icenews.is/index.php/2009/02/16/kaupthing-sweden-sold-to-finns/#comment-65323
Bear mind that ECB prints the Euros etc. so it has operate within EMU and other guidelines of EU and EEA. If doesnt and show favoutitism or acts reckless then that is very bad thing and serious issue.
So again — please do more readings into this.
Ingimundur no more likely tell lie than members of ECB. I can say same about ECB that they have bias too. But think that certain things facts it is significance of them and indeterpretation that matter.
@Fisy
All I know about this matter is that DNB considered Icesave a dubious new player on the dutch market since there were (justified) doubts about the safety of Landbanki behind it.
This at least is the only reason i have found in the press.
There is a possibility off course that protection of dutch banks against foreign competition played a role too.
However I do not really believe this since the interest rate offered by icesave was not absolutley unique. There have been other ‘exotic banks’ active in the dutch market (even since many years) who offer similar rates as icesave did (for instance “Yapi Kredi Bank” ). These banks do have their own nieche. They get depostis from people who think the interest is worth the risk, just as happened with icesave, while the great majority of savers choses banks which they know to have a ‘safe reputation’..
I do not know about any restrictive rules against these ‘exotic banks’ .
Like I said, there was an agreement with icesave but DNB forgot to control it properly and already in its first month on the dutch market icesave attracted more money than had been agreed.
I do not beleive too in some big european conspiracy agains the icelandic banking sector (at least I think you are hinting at that).
First of all, I do not think things work like this. Moreover I do not think the ECB would deliberately blow up a bank in which a lot of european citizens have savings, just because it would want to ‘kill’ a competitor. After all, this competitor was still a small player and not really a great danger for the established banks..
I have asked you if you could give some more info on the ECB ‘s decision to ask for a rapid repayment of the loans. I could not find any other sources than Ingimundur’s paper.
I also could not find sources implying that it was a deliberate attack from the side of the ECB on Iceland.
In a way though I can understand the decision of ECB. The icelandic banking system was becoming more and more shaky (even Ingimundur makes clear in his paper that from the beginning of 2008 things were getting tough and it seems that Sedlabanki was desperately trying to improve things during the entire year).
If a debtor seems to be running out of options, there is usually a run on him by his creditors who are despreate to get back at least their own money.
>Regarding the ECB/Dutch thing, I don’t see what you’re getting at. If you wanted to supply a reason for Landsbanki breaking the agreement, then that’s fine – you’ve done that.
Yes, it seems that this is a reason is it not.
>But what is there to investigate? The Dutch FSA would still have believed that Icesave was a risky operation, almost certainly they would have believed it even riskier after the ECB called in the loans.
Niels gone silent but what I want to understand — which again not sure you say above is true reason — that limit to EUR 600 million of deposits was made for IceSave by Cenrtal Bank De Nederlandsche Bank (DNB) because of some risk issue.
Niels can you explain if report say it was because of risk or because it was competition from foreign bank that DNB itself not keen on and what source of this is report and if it is speculations. I find this aspect all very unclear.
Even one way or other I think another memberstate maybe — Netherlands — cursing EU regulations because of mess they cause on this case.
Thanks Fisy, I’ll answer in the other thread then. I’ll just say here that we obviously disagree in our interpretation of the intentions of the Icelandic government from that transcript (i.e. before the freezing order).
Regarding the ECB/Dutch thing, I don’t see what you’re getting at. If you wanted to supply a reason for Landsbanki breaking the agreement, then that’s fine – you’ve done that.
But what is there to investigate? The Dutch FSA would still have believed that Icesave was a risky operation, almost certainly they would have believed it even riskier after the ECB called in the loans.
Now that is what I was getting at Brumly86. Do it not deserve more digging?
Buiter looking at evidence UK had BEFORE they seized and put on terrorist list with Taliban etc.
What Icelandic government says AFTER event is different time and situation.
So doubt he like all other reasonable thinking people has changed opinion.
I won’t repeat again and again in every thread but instead link to my earlier on this:
https://www.icenews.is/index.php/2009/02/16/kaupthing-sweden-sold-to-finns/#comment-65323
Fisy. It’s possible that Buiter may well still hold that opinion, however that article was from before it was confirmed that the Icelandic government really did not intend to honour the guarantee.
So the official excuse does hold water.
As to your second point, I take it your saying that the ECB effectively forced Landsbanki to break their agreement with the Dutch FSA by demaning repayment of loans in 2008? That’s a fair point.
I have not big criticizm of Holland authorities — they deal civilized with Icelandic banks. I have big bone pick with Brown Darling who completely ridiculous reaction.
Even Buiter say it.
http://www.voxeu.org/index.php?q=node/2498
“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.”
Holland people is known for carefullness but again you miss point about ECB “Standing facilities” and what ECB did how it undermine Buiter pro-EU for Iceland idea but for now I just let that one go. Maybe Brumley86 do reading on that later.
What I not let go now is this
>You do well not to try and dismiss so easy–particularly not my question of where repayments of ECB loan facilitity loans came from which appear good and relevent to issue with alleged deal of IceSave in Holland and limit of deposit taking.
Dont ignore this aspect, which is answer I was asking for not the others.
Hi Alexander,
First of all it would be a good idea if you read the article by mr. Buiter, it might answer some of your questions.
Here is the link:
http://www.nber.org/~wbuiter/iceland.pdf
Basically Iceland’s banks had a balance total of 9 to 10 times the icelandic GDP. This means that if things start to go wrong, the national bank or the national government do not have the power to take actions in order to save the banking system.
Other countries also have banking sectors bigger than their own GDP, for instance the UK, Holland and Switzerland, but their ratio is less than in the case of iceland and national authorities exerting control are better developed.
So here the situation is slightly different.
One fundamental difference between for instance Switzerland and Iceland is the fact that banking in both countries was totally different. Swiss banks are only there to conserve (hide away) money so they are naturally risk-adverse.
icelandic banks on the other hand wanted to grow as much as possible and in doing so they took too many risks.
So there is no real formula, it also depends on the nature of banking and the amount of control which the national authorities have. if there would be a formula (an interesting idea) it would have a lot of variables. :-)
Your question: should they be bailed is an interesting one. The very same mr. Buiter argues that in stead of bailing out failing banks it would be a good idea to split a troubled bank in a ‘good’ and a ‘bad’ bank (thus isolating the debts) as has happened in Iceland.
Please keep in mind however that Iceland NATIONALIZED its bank and this means that the icelandic government faces responsibility for its debts (even though the situation is still unclear).
As for the missunderstandings between DNB and the icelandic side: you are right, DNB also made misstakes and they are being criticized for this. They thought that the other side would honour its agreements and failed to control it. They were perhaps too naive , believing that they could trust the words of the other side.
However, Alexander, if you are a small country and if you live according to the law ” that anything goes” , you should not be surprised that at a certain point your creditors will pull the plug, don’t you think?
As for the amount of controls by DNB which I witnessed, I do not think it is a bad thing since it has prevented the excesses which have happened in Iceland.
maybe an anecdote: our bank was so affraid of DNB that there was a specially dedicated datacom connection for sending in these data. Every morning, early on, we were supposed to check if it was working by sending a dummy file to DNB. If there was the slightest doubt about the connection, we immediately hired a messenger, printed out the data on a floppy and had this floppy driven to DNB at high speed!
man, it was prabably even BEYOND the USSR!
2Niels
Interesting post indeed
But!
Could you provide reference to any rule, law or formula that say what the size of country and bank should be?
WHO SAID that private bank can not be “bigger” than economy of its country? This is against laws of free economy. BTW what about Switzerland? Because nobody knows how much bank keeps there – nobody raises alarm? Or what?
The size of the Icelandic banks are small in fact. Nothing compare to other monsters.
Country couldn’t bail them out? But question is – should they be bailed out? Even Marx would be against it ;)
And this is not “silly” question, Niels. Unless you know what the perfect size should be.
Sounds like Soviet Union…b-r-r-r-r
I wonder if US banks has to report to Federal Reserves and by what time – East coast lunch time or Alaska breakfast? And how do they operate without reporting??? And if they reported – how did they “loose” trillions?
Do you understand why I’m calling some of you here as marxists (joking of course).
You keep saying “Laws were intact but they broke our agreement” Is it a kind of criminal, mafia business over there? Everything allowed unless prohibited by the law!
I just imaging following phrase on the IceSave web site “Dear Dutch new customers. Sorry, but you are no longer allowed to open account with us. Your government prohibits it.” :))))))
What kind of legal paper was it? I mean – agreement? What does this agreement say about those customers who come after 500 million limit?
So whose fault was that? Have DNB placed on table at least a draft? Have they try to print it?
And now you want Iceland to trust EU? At least as small but independent country Iceland could join US as 52 territory. Or China – as Northern Hong Kong ;)
Sorry, I see you were talking about the loans and not the margin calls.
>Crucial in the argument of Ingimundur is the fact that ECB apparently all of a sudden demanded repayment of some loans. I have been looking on the internet but I could not find very much. Could you please provide me with a link to another source than this paper?
I think you provided it yourself Niels in that link:
“Instead, on Sunday, the central bank announced that the government was taking a 75% stake in Glitnir in return for a cash injection of $750 million, valuing the bank at less than half the market price of the previous Friday. That quickly backfired: Standard & Poor’s and other rating agencies immediately downgraded Iceland’s sovereign rating.
The domino effect was immediate: ***Landsbanki had been using Iceland paper as collateral for refinancing transactions with the European Central Bank, so it had to put up more funds, making its situation even more precarious.***”
This would fit with my (limited) knowledge of what a margin call is. When you borrow, you use assets as collateral. You agree to provide more collateral if the value of the original collateral falls below a certain point.
The only wierd thing is that your article says (assumes) that they did satisfy this margin call whereas Ingi says that the call was withdrawn.
Hi Fisy
I always take your posts very seriously and I honestly admire the tenacity with which you defend your views.
As for the paper written by mr. Ingimundur, I have no doubt that he is a competent man. Probably he even made more policy at the national bank than Oddsson, since he is the real economist with experience.
Basically in his paper, if I read it correctly, he is giving the following analysis of the collapse:
Icelandic banking system had grown too big and exposed.
National bank tried to exert influence since beginning of 2008.
Kautphing was dissuaded from buying NIBC
National bank started monitoring banks closely
National bank tried to attract more reserves in order to be able to act as a lender of last resort.
However national bank failed at this since it was difficult to obtain finance and banking sector was simply too big.
Then the ECB all of a sudden insisted on the rapid repayment of some loans.
This led to a chain of events, including the seizure by the UK and the collapse.
Very shortly, this is his analysis , right?
Basically he is confrming the analysis made by Buiter. Buiters thesis (as you know):
“The icelandic banking system was not viable because of a combination of several factors:
1. a small country
2. a small free-floating currency
3. a banking sector much too big related to the size of the national economy
4. a national bank being unable toact as ‘a lender of last resort’
In essence Ingimundur only admits one failure: the fact that the banking sector had become too big.
I must say that I have a point to make:
Apparently it was considered a big step forward that the national bank started to monitor liquidity of the banks on a daily basis.
I would like to tell you that I worked for quite some time at one of the big dutch banks and here it has always been the practice to do this every single day. Even back in the 90-ies when the economy was only growing every single dutch bank was required to deliver all kinds of information on liquidity, dealings and all kinds of other ratio’s to the headquarter of DNB (dutch national bank) before 12, otherwise enormous fines were given.
The fact that this practice only started in Iceland last year casts some serious doubts on the professionalism of the icelandic national bank.
In my opinion Sedlabanki was still used to the cosy years before the privatization and growth of the icelandic banks and was unable to raise its standards.
Another point, even though I have no reason to doubt his honesty (i have not found anything negative about him) it is a fact that mr. Ingimundur was a part of the icelandic system himself and he will probably not be 100 % unbiased in his analysis.
I mean, if you look on the internet for articles on the crisis, you will find lots of sources which are far more critical about the icelandic side, sources which are quite respectable.
Crucial in the argument of Ingimundur is the fact that ECB apparently all of a sudden demanded repayment of some loans. I have been looking on the internet but I could not find very much. Could you please provide me with a link to another source than this paper?
As for credit facilities by the ECB I am not sure, but AFAIK the ECB offers credit swap facilities to some other operators outside the EU but I think this only applies to Switzerland.
As for the role of Oddsson and the Sedlabanki here is an interesting article form CNN, quite critical about Oddsson’s delaings with ECB and the crisis:
http://money.cnn.com/2008/12/01/magazines/fortune/iceland_gumbel.fortune/index3.htm
I really do think he is not the right person in the right place.
Now let us focus on Holland and Icesave. Basically iceasave entered the dutch market and could not be stopped by DNB because of european regulations. However, Icesave simply broke all agreements with DNB:
1. it attracted much more than the 0.6 billion of euro in savings which was agreed
2. it promessed to make a deposit fund to compensate dutch savers in case of bankruptcy
1.http://www.telegraaf.nl/dft/nieuws_dft/2200894/__DNB_trok_eerder_aan_de_bel_bij_Icesave__.html
DNB, under European rules cannot refuse a bank permit. The regulator in May made an appointment with Icesave parent company Landsbanki in the first year not to attract more thano 500 million euro of Dutch savings. In June already it became clear that Icesave had broken this agreement. When DNB confornted Icesave with this claim, in September the Icelanders made it clear that they did not feel bound to the agreements.
2.http://www.telegraaf.nl/dft/3084297/__DNB_wist_van_wankel_Icesave__.html
crucial passage in translation
Already in August 2008 shows DNB Icelandic bank twice asked to have to stop opening new savings accounts, because the problems of Icesave. A delegation traveled DNB even down to the head office in Iceland.
Icesave offered to park money in the Netherlands, as a kind of guarantee. But none of the agreements were respected or even put on paper.
Now if you are angry with the ECB or any other european institution taking measures against Iceland, if you see that icelandic banks entered our market and, in spite of the positive sentiment which existed towards them in NL broke all the rules and did not honour their agreements, are you surprised that at a certain point, all trust was gone and european institutions started demanding their money back??
It is really not a european conspiracy, the fault is on the icelandic side.
Finally with mr. Buiter, could you please give a link to an article from him you are referring to?
>I give benefit doubt to you Brumley86 that you really not read about this things
Thanks Fisy. You’ll have to keep extending that benfit though as I had a quick look and decided that I don’t want to figure out exactly what was going on from the ECB policy document :) . I gave up when I realised I’d have to read the whole thing to establish if Iceland was entitled or not (on the surface of it not, as it is not a Member State).
>there was no chance of a call to Hitler making a difference, whereas Haarde calling Brown could not have hurt Iceland.
Notice you not say Geir calling Brown make difference because know it would not either.
Ministries talk and of course letters exchanged — including “clarifications” from UK about what anti terror list meant — admission of guilt in how bad it was for Iceland companys becuase of Brown words — but too little too late.
https://www.icenews.is/index.php/2008/10/12/britain-reconsiders-assaults-on-iceland/
“The statement sent to the Ambassador of Iceland in London says that the terrorism law applied to Icelandic companies doing business in the UK only applied to Landsbanki (Icesave).”
This was not enough so 17th October UK Treasury force to release detailed 44 point 5 page official follow-up notice “clarifying” basic points such as:
“…The Order is specific to Landsbanki and does not freeze the funds of any other Icelandic banks. It does not affect Icelandic companies with no links to Landsbanki.
… This Order works in a different way to, and has a more limited effect than, financial sanctions regimes, because the prohibition on making funds available only applies to “frozen funds” (as defined in paragraph 5 above) rather than all funds. This ensures that the Order only relates to the movement of Landsbanki assets (including debts owed to Landsbanki).
… As the Order does not relate to funds other than frozen funds (i.e. Landsbanki funds), it does not restrict normal commercial transactions between the UK and Iceland, other than those involving such frozen funds.
… Under the Order, the Authorities and the Government of Iceland are included as “specified persons” for the purpose of the prohibitions. The effect of this is not to freeze Icelandic Government assets in the UK or to prevent all payments from the UK to the Icelandic Authorities.”
etc. Gods!
The weeks of hell for Icelandic company because of this opportunist of Brown Darling and statements. What good is phone call from Geir?
It took weeks before Brown Darling would release this after much diplomatic pressure. Brown Darling not worth breath.
Brumly86 and others here is some facts for you to read about ECB and policies.
Main part is to start read about “Standing facilities” here then you easily read outward to understand:
http://www.ecb.int/pub/pdf/other/gendoc2008en.pdf
I give benefit doubt to you Brumley86 that you really not read about this things — but from this source not difficult to find facts to give ability for you to answer my questions above.
Niels you gone off somewhere away from subject and too much into ad hominem — it is not like you. Ingimundur as Seðlabankinn director for many years with deep experience as economist have something journalist not have which is inside knowledge of what actually happen during these times.
You do well not to try and dismiss so easy–particularly not my question of where repayments of ECB loan facilitity loans came from which appear good and relevent to issue with alleged deal of IceSave in Holland and limit of deposit taking.
At least you reply tho. Others who give so much opinion on this befroe now gone silent as rock which intersting.
Remember also about discount window-and so on is one big thing that Willem Buier gives as reason for Iceland as EU memberstate.
Remember problem is not what EU burecrats say will do but what actually do. And we have now evidence of how they deal with Iceland with it small population size compare to other memberstate.
>This is not about “proud”. I hope you know the history so you’ll understand my example:
Do you think Stalin should have called Hitler AFTER June 22, 1941?
Ridiculous comparison. Peter has already covered that – there was no chance of a call to Hitler making a difference, whereas Haarde calling Brown could not have hurt Iceland.
Just wait until next time. You’ll have nothing to complain about when out new Fluffy Bunny Act 2009 is invoked :D .
“We are freezing the assets of Icelandic companies in the United Kingdom where we can. We will take further action against the Icelandic authorities wherever that is necessary to recover money.”
Here is BBC news articl 10th Oct http://news.bbc.co.uk/2/hi/uk_news/politics/7662027.stm
Just this was lie and not what was doing. It was just to put Iceland authorities and Lanksbanki on UK terrorist block list and take money and subsidiary Heritible and also Kauthping Singer Friedlander and monies.
But lie had effect of causing that problem for money to Iceland and also credit to Iceland companys which is bad bad bad faith — he knew he was not doing it but told the world was.
>Anyone else think that maybe the fall of the coalition government WAS Haarde’s fault?
Not looking by what happen after — it is split in Social Democrats which Ingibjörg Sólrún could not keep hard left and other opportunists from forcing break of it.
This seen by them as opportunity of lifetime and the grab it — even if cause trouble for foreign investment and other things — they get moment of power and spotlight.
Lots of pressure came from both Social Democrat factions in Reykjavík region and outside to break it.
It clear from public statements before this not what Ingibjörg Sólrún want because now was time to show metal not this power grabbing.
Peter of Germany.
This is not about “proud”. I hope you know the history so you’ll understand my example:
Do you think Stalin should have called Hitler AFTER June 22, 1941?
And not calling is not same as not protecting, btw.
Anyone else think that maybe the fall of the coalition government WAS Haarde’s fault?
fisy said:
“Gordon Brown acted in huge bad faith. After freezing order and siezing orders is done which is so bad already he goes on TV and lies about the action of the UK government toward Icelandic businesses to the world and when you have this kind incredible action — there is no going back from it.
Have no doubt it was Brown just goes on TV first and tells these lies that stopped most commerce with Iceland busineses rock dead for at least 2 week.
I would not talk to him either.”
This is not about national pride and anger about British behaviour. This is about national interest and realpolitik. Or at least it should not have been. It is as simple as that: Whatever you may feel about that decision, you may feel insulted and humilated, and I can actually understand that. But from a point of view of an Icelandic Prime Minister these aspects are beside the point. What he needs to take care of are Iceland’s interests and that’s why he should have called Gordon Brown. That way there would have been at least a slight possibiliy to change something. It does not help the interests of any country if its leader says: ‘No I am not going to call this guy because I am too proud to do it and my nation feels insulted.’
It’s no good not to make a phonecall because you are too proud to do it when this phonecall may have helped the situation of Iceland. Okay, no one knows whether a phonecall would have made any difference, but there is at least a slight chance.
The problem I have with the story as it has been put down by Ingimundur who is (was) most of all a Sedlabanki employee: As we all know admitting mistakes is not a very icelandic characteristic and in my opinion he is in a rather one- sided manner busy trying to cover up his own faults: he does not become very specific, does not give hard facts, only comes up with the story that poor Iceland was brought down by evil scheming , jealous neighbours.
There have been numerous analysis of the icelandic collapse, published by well respected economists and publications who tell another story and put most of the blame on the icelandic side.
I am specifically referring to Buiter (who already correctly pointed out in APRIL 2008 that the icelandic banking system was unsustainable) , Portes (who in spite of his Iceland-friendly attitude strongly criticized Sedlabanki) and the following article in the economist:
http://www.economist.com/world/europe/displaystory.cfm?story_id=12762027
Talking about Buiter, love him or loathe him: his writings make great reading:
http://blogs.ft.com/maverecon/2009/01/can-the-uk-government-stop-the-uk-banking-system-going-down-the-snyrting-without-risking-a-sovereign-debt-crisis/
Some people on this forum think that the whole collapse was brought about by the seizure of Kaupthing assets by the UK authorities and the dutch authorities who took similar measures.
AFAIK no such seizure occured in NL. At least I have not found any reports about this.
I just found a research paper which unfortunately is in dutch but makes great reading. it tells the story of Icesave in the Netherlands , the attitiude of public opinion and the developments of the icelandic economy in the background.
one very typical thing: there was NO jealosy or animosity towards Icesave, in fact, the dutch press was very positive about a bank which offered high interest rates. Icesave was hailed as ‘a brave small underdog’ , challenging the dutch establishment which ‘cheated’ the public by only offering them low interest rates.
In june the CEO of rabobank, one of the biggest financial institutions in NL criticized Icesave, stating that this company was not reliable. In the press he was slammed for this: all the leading newspaper came in defence of Icesave, calling the Rabo CEO a ‘xenophobe’ who was trying to bully a good competitor.
In their positive reports on icesave some banks went even very far. At the end of august “de telegraaf'(biggest newspaper in NL) lauded landsbanki for the fact that it ‘did not use its icesave profits for investing in whaling.’
In the meantime it already became clear even ‘mighty’ Kauthing was facing trouble. the story is also mentioned in the paper of Ingimundur : the failed atttempt of Kaupthing to buy dutch bank NIBC a very relevant event in my view., proving that Kaupthing was running into trouble already in early 2008.
the paper mentions the following things:
august 2007: Kaupthing agrees to buy NIBC
november 2007: Kaupthing runs into trouble financing the deal: it wants to pay less cash than had been agreed
january 2008: the icelandic stock exchange faces a severe downturn: Kaupthing loses 30 % of its values in a period of about 3 months.
It becomes very doubtfull wether Kaupthing will be able to finance the deal. The icelandic national bank orders Kaupthing to attract more money in order to improve its financial position. Kaupthing fails to do so and by the end of january the deal is cancelled.
http://www.trendlight.nl/docs/icesave.pdf
Sorry, but I cannot find evidence that the icelandic crisis has been caused by intervention of jealous foreigners…
As one of the oldest jobs – originally it was not about being tough or even smart. It was about reporting! To see or hear something – and report to people. That’s why even recently we called them reporters.
But these days – when they are after their own ideas and ratings – being tough is an easy way to get what you want. As being smart is too difficult and very often not rewarding at all. As best (more often – brings troubles only).
So I personally don’t buy Sackur’s toughness. He is good showman – that’s it.
As I said – there are diplomatic rules how countries should deal with each other. And it was Brown who was coward and “plunge the knife to the as…back” of Geir. There was no point to talk to Brown after that. About what? Just to call him “asshole”?
Well, Icelanders did it better
http://indefence.is/
Fisy. Strawman is an overused term, especially in this context. I’m not the one who advanced a position (i.e. deliberate attacks on Kaupthing) without fleshing it out.
In the absence of any further info aside from those few sentences from a Sedlabanki employee, it’s difficult to know exactly what happened. However:
1. I may be wrong, but I suspect that the Icelandic banks, whilst allowed access to EU memberstates, are not the responsibility of the ECB. So yes, at a push, if an EU bank needs funding to support it at the same time as an Icelandic bank, the Icelandic bank is going to have to look elsewhere. If I’m correct in this, you cannot have any problem with the ECB’s action.
2. I am uncertain what a margin call is. Looking at wiki (I know, I know :) ), I’m guessing that either the ECB lent the banks money which they used to purchase shares (leading to the potential for a margin call if those shares have fallen in value) or, and this is the bit I’m making up, the ECB lent the banks money that they lent on and the recoverability of those onward loans (i.e. to Baugar) was called into question.
So note that we’re not talking about repaying the whole loan here, just whatever is necessary to reset the margin to it’s required level.
Either way, the ECB was presumably perfectly within their rights to make this margin call (Ingimundur doesn’t say that they weren’t, he just implies that it was unhelpful). They’d have been perfectly within their rights to make this call even if they are required to treat Icelandic banks the same as they would EU banks. As Ingi states, the ECB had already in 2008 been getting worried about the Icelandic banks and not renewed loans.
So I think the ECB guys were shitting it. They could see that Iceland was in the shit (whether the banks were to go under or not), saw that the conditions for the margin call had been satisfied and wanted their money back. Hell, maybe they wanted to give it to one of the many European banks that needed it.
As to the withdrawal of the margin calls, we don’t know why that happened. Ingi says that he doesn’t. Maybe David or Geir spoke to them and pointed out that paying the margin call would actually lead to insolvency and the loss of the rest of the loan?
I do not think that they were trying to sink Icelandic banks, which is what you are saying. No one gets a free lunch – Iceland chose to be outside the system and that’s fine, but don’t expect the ECB to prioritise a foreign country over its own.
The same with credit ratings. If Kaupthing (helped by the whole Icelandic system) had failed to protect itself, then that’s *your* fault and not the ECB’s. If you want independence and to be treated like a sovereign nation, you can’t complain when you are.
BTW, please make excuses for the arguments above if my understanding of margin calls was way off. The core argument is that I don’t believe that the same rules do apply to EU and non-EU banks with regards to the ECB. Happy to be corrected on that though.
>I simply cannot understand why he preferred to complain to the media instead of calling Downing Street immediately to complain about that decision and to explain the Icelandic position
You can be sure that a complaint was made Ministry to Ministry which is how it meant to work.
Gordon Brown acted in huge bad faith. After freezing order and siezing orders is done which is so bad already he goes on TV and lies about the action of the UK government toward Icelandic businesses to the world and when you have this kind incredible action — there is no going back from it.
Have no doubt it was Brown just goes on TV first and tells these lies that stopped most commerce with Iceland busineses rock dead for at least 2 week.
I would not talk to him either.
Alexander, I am sorry to say so, but being tough to politicians is a journalist’s job. British journalists are, by the way, equally tough to their own politicians.
As to Haarde’s phonecall: As I see it a Prime Minister has to protect the interests of his own country (and abide to international law). If Haarde thought Brown’s decision so damaging and so disastrous for Iceland I simply cannot understand why he preferred to complain to the media instead of calling Downing Street immediately to complain about that decision and to explain the Icelandic position.
question ? gone silent of course but not surpise after that waffling reply.
Brumly86
>As to the earlier “attacks”, are you suggesting that the ECB deliberately lent money to Icelandic banks with the intention of deliberately withdrawing it
Please forget carefully construct straw man and get to the core of facts as presented by Ingimundur. Comment on those. For example:
What do you think ECB margin calls mean and information of that getting out. Then cancelled. What impact on credit raising of Kaupthing.
Where did money to pay back immediate repayment of loans to European Central Bank come from?
Why there one rule for banks of larger memberstate but different one for Iceland banks despite rules meant to be same. Why suddenly change track in loans making immediate due when bigger memberstates need loan money for their failing banks at same time. Coincidence you think?
Dont play strawman dunce here Brumley86. You have more intelgence than that as shown in many posts you make.
etc.
>Of course the UK FSA under Brown Darling instruction seized Kaupthing Singer Friedlander and that caused a technical default that bought down Kaupthing.
Well, that’s not an attempt to kill off Kaupthing. It’s an attempt to protect deposits in the UK that incidentally killed off Kaupthing. Kaupthing was collateral damage rather than the target.
As to the earlier “attacks”, are you suggesting that the ECB deliberately lent money to Icelandic banks with the intention of deliberately withdrawing it? Assuming that you’re not, are you then saying that the ECB isn’t allowed to decide who they lend to? Because if the problems with the renewal of the loan were because the ECB was worried about the stability of the banks, then they’d have been absolutely correct.
You’ve already quoted the following from the report yourself. Doesn’t look like the ECB wanted to take the banks down, otherwise they wouldn’t have reversed their decision:
“Early in October, two Icelandic banks received sizeable margin calls from the ECB. The ECB demanded that they be met immediately, which would have driven the banks to collapse. The news of these margin calls spread widely. For reasons that were not explained, the ECB withdrew the margin calls at the last moment, in spite of the fact that the Central Bank of Iceland had been informed
that such decisions by the ECB were irrevocable.”
Physchim62 you in particular very quiet suddenly.
>Furthermore, no one at the ECB or FSA attempted to kill off Kaupthing or the two other banks.
Really? Can you perhaps be hard of reading English?
Of course the UK FSA under Brown Darling instruction seized Kaupthing Singer Friedlander and that caused a technical default that bought down Kaupthing.
It’s fact.
But it is not the first attack against Kaupthing from the EU and its memberstate. And in those attacks the European Central Bank is involved. Did you not understand what Ingimundur was telling in his report?
Steingrímur should hang his head in shame for not picking up on this.
Above is mentioned and here for readers just looking here now
https://www.icenews.is/index.php/2009/02/06/the-banking-crisis-in-iceland-in-2008/
Ilana Goldman-Vink said:
“The BBc interviewer was too agressive and populistic but Geir was weak in english and in his lack of readiness to say that he was making mistakes.
All bankers apologize around the world so he for sure could be politically more correct than he was-even if he did not mean it.”
—————————————————–
The fundamental difference is that Geir is not a Banker, he is an ex PM. He was democratically elected to that position with a manifesto. He has the perfect right to allow that same process to decide (after a investigation) where the responsibilities lie.
Bankers have only apolgised when lined up against the wall by parliamentarians while bailout money from the State was being stuffed into the Bank vaults.
Their apologies were for public consumption to assuage some public anger and dismay. Some might say, crocodile tears.
Indeed i agree Geir is not suppose to answer in other language than Icelandic but he lacks that as well!! Lots of talking , and trying to cover the stench but the smell cant hide specially for Geir & company. Get ready for 2009 and ready as Gerald Celente says, maybe he should come to give some talks to the nation… that may help the views of some people in need
@Peter
I’m also tough…on journalists because what they care about is either raiting of their shows or their own agenda. Or both. And Sackur is one of the most obsessed among showmen.
And I’m glad he got bloody nose when Geir said “Not at YOUR BBC show”.
You can force anyone to say “Sorry”, “I apologize” etc. But what’s good in it? If Geir feels he should – he will say “Sorry”. In Iceland and to Icelandic people. If not – so it be. And people here will judge him by this. But THIS IS NOT Sackur’s business. What he wants – to get a score and say “I have two Prime Minister’s sorries, one Queen apology, three Presidents I-made-a-mistakes! Look, how tough I – Stephen Sackur – is!”
At least this is what I think about Sackur after watching him over years. He is tough but sorry, he is not that smart as he is tough.
As Geir says – “I didn’t read it this way”.
It was up to Mister G. Brown to pick up phone and call Geir at least to warn him “You know, we are considering to confiscate something…so don’t be surprised honey”
There are diplomatic “rules of engagement” and it was Brown who broke them. As Geir rightly said “If it was not small country like Iceland – he wouldn’t have dared doing this”.
So – what was the point to talk with Brown AFTER actions had been taken? Would Brown say “Sorry, we’ll return everything back to what it was”? Or what?
PS. As to English – Geir is not supposed to answer in any language other than Icelandic. It’s BBC problem how to translate. If they don’t have time to talk to PM of other country about serious matters – cause they need to inform about football results – f… with the whole BBC.
Fisy,
Your defense of Geir’s placing blame on the EU’s EEA banking framework for Iceland’s banking collapse is incorrect.
Furthermore, no one at the ECB or FSA attempted to kill off Kaupthing or the two other banks.
Why?
Iceland’s political leadership at the time made a simple yet fatal mistake when they took the banks private. They put the government’s full credibility / prestige at the hands of Iceland’s banks by publicly telling the global money markets all is well in Iceland.
The result being, when the global markets turned very ugly they had no political cover left – this started way before the Lehman Brothers failure. The market assumed if the nation’s President, Prime Minister, and Central Bank got it so wrong what else is lurking in the mist after Glitnir was taken over by the state.
No independent voice of any influence was left to defend Iceland’s banking interest.
Geir and others also failed to understand that the global ratings agencies saw Iceland’s three major banks as one really single mega bank.
Still do not understand how Geir and others failed to understand this, as it was the Independence Party / Progressive Party in government whom marketed this strategy overseas to gain access to capital for expansion for the newly private banks.
I can tell you, senior bankers in Iceland understood this systematic failure threat very, very well. They and their government put it in place to gain capital.
The above has nothing to do with the ECB, EEA, or FSA.
This was a made in Iceland problem.
To be fair to Geir, he mentioned the role of the globa ratings agencies during his HardTalk interview. He is very correct indeed. FITCH, S&P and others should have called the Ponzi game way before it reached the level it did. They did not as they too made money from the game by charging service fees to Iceland’s banks. So they had a self-interest in keeping things going.
Sure, the interviewer was tough, but that’s what he is supposed to be. Journalists are not there to be nice, but to seek information and clarification. If they start to be nice to politicians, than they have failed in their task.
British journalists ask tough questions regardless of whom they talk to – that is one of the very admirable things in British journalism.
BTW: I was almost shocked to hear that Haarde did not care to contact Gordon Brown after all this war of words. It’s actually rather scandalous and speaks volumes!
There is a long history of Iceland’s elite not admitting mistakes, doubt this will change anytime soon.
As for Geir’s reference to the pending national investigation, from what I understand his wife is from the same village as the person leading it. It’s a small place and people know each other very well.
Nevertheless, Geir was savvy enough not to lie during the interview on HardTalk when questioned if Central Banker David Oddsson repeatedly warned his government over a long period of time about the pending banking collapse.
My take on this is, Geir’s Independence Party may very well return to government during the next election cycle and people will forgive him.
C.Alexander say:
>Geir makes an mistake and contradicts himself about 9.45min. after the interview starts
Which video you looking at? I see not any contradictions in ones at link given by Brumly86.
>Geir was weak in english and in his lack of readiness to say that he was making mistakes.
He is perfectly articulate although you can hear slight strain in voice since surgery for the cancer of throat.
He is not going to apologize on BBC programme but at home once it shows what he actually has to apologize for.
Why is that surprise? Of course that is how it should be.
It is for others to judge him as he says.
Notice Steingrímur as so clueless now in his role of Ministry of Finance — that crazy appointment of century — to understand significance of this report from Ingimundur despite earlier so called hard talk before of Steingrímur when in nice comfortable position of opposition to throw rocks at last government in 2008 on this very issue of EU memberstate poor treatment of Icelandic banks.
What is he doing now on it? Nothing. It was all talk.
Jóhanna and fellow hard left rushing their stupid political and poorly written bill and ideas of clean sweep end up alienating good people like Ingimundur and also those interim heads of Kauthping — Magnús Gunnarsson, and Glitnir — Valur Valsson etc etc.
Sorry Jóhanna all peple are not equeal no matter how much wish it so and try to make it so through socialist policys.
Ensuring good people of professional nature leave important roles so end up having to appoint incompitents or ones with no experience or play musical chairs is suicide for econmoic recovery of coutrny and reconstruction of banks.
Geir really is civilised man, and its fair enough the questions but also the answers.
Its true, this interviewer is a cheap version of Jeremy Paxman.
What I found most interesting is Geir mentioning the responsibility of the EU regulation and cross border internal markets of the EEA customs union in crisis.
In the report form Ingimundur Friðriksson which of course many want to ignore he talks of clear interesting facts about ECB and other memberstate trying to kill Kaupthing and leser degree Landsbanki but mostly failing to do so — the bank was strong — it took freezing order of UK on KSF in end to do it in — cant of course survive that.
(This is what make Willem Buier report looks so stupid about Iceland needing EU — they had access to what he said through subsidiaries. Just look it is obvious what happens in EU they just dont play fair. It is all about memberstates by population size)
Before that action of UK, memberstate and ECB tried to kill Kaupthing at least twice but didn’t succeed. Without final UK action pretty clear it would surive.
Honestly it is hard not fiund only explanation of jealousy for actions trying to protect own local banks. Instead of amending single market legislation they instead use dirty tricks against Kaupthing.
https://www.icenews.is/index.php/2009/02/06/the-banking-crisis-in-iceland-in-2008/
“For several years, the Central Bank of Iceland’s rules on liquidity
facilities have been largely modelled on those of the ECB. I say
largely because for quite a while the Icelandic rules were rather more
stringent than those in Europe – that is, the Central Bank of Iceland set
stricter requirements concerning eligibility of collateral. Facilities in
the Central Bank of Iceland resembled those in the ECB’s jurisdiction;
the collateral accepted was similar, and so on. This applied, among
other things, to bonds issued by banks. Last year, steps were taken to
align the Icelandic rules more closely with those in Europe in order to
increase access to liquidity.
In 2008, the European Central Bank responded sharply to what it
considered excessive borrowing from the ECB by Icelandic banks
through subsidiaries in EMU countries. The loans concerned had been
taken in compliance with the ECB’s rules on liquidity facilities for
financial undertakings in EMU countries, but the ECB demanded that
the Icelandic banks repay, quite quickly, a large share of the facilities
of which they had availed themselves in good faith. Those repayments were funded at least partially with deposit accumulation in foreign branches.
Early in October, two Icelandic banks received sizeable
margin calls from the ECB. The ECB demanded that they be met
immediately, which would have driven the banks to collapse. The
news of these margin calls spread widely. For reasons that were not
explained, the ECB withdrew the margin calls at the last moment, in
spite of the fact that the Central Bank of Iceland had been informed
that such decisions by the ECB were irrevocable.”
The BBc interviewer was too agressive and populistic but Geir was weak in english and in his lack of readiness to say that he was making mistakes.
All bankers apologize around the world so he for sure could be politically more correct than he was-even if he did not mean it.
OHH, just realized we are two Alexanders posting here.. I will go as C.Alexander from now on.
Geir makes an mistake and contradicts himself about 9.45min. after the interview starts. Trying to answer if the government knew of the potential danger of a financial crisis, he says him and Oddson had been in close contact of this over a long time (before the crisis it must be, if you look at the question). A bit of a funny statement in the light of how he always tries to slip around the question,when asked directly how he could not have had any idea of the mentioned danger.
even to give an excuse was too much!!!!!!,or(!!!)to say that he was to blame also was not possible for him. Island afram….
Good interview. Some tough questions.
I’ve only been able to see a 4min out-take so far, and I have to say that Geir is obviously struggling with his English in places. All the same, he seems to want to blame the EU for the the deregulation of the banks and the EU for the losses, both at the same time.
Nor is he able to simply say “Something went wrong and some of it must have been my fault.” Both are proven by the Court of Public Opinion (!) so what’s his defense. That he’ll “wait until the investigation is over!” somewhat lame, I have to say
Another point i dont like from Geir is that he mentions the on going investigation but he does not point out that the so called investigation is being carried out by a small town sheriff, the one by the sound of GEIR doesnt seen to blame the government, the same economic policies? recuperation? lest see how 2009 impacts the Island. I very much agree with the reporter ” it doesnt take a rocket sciences to figured out”
Not that I’m fan of Geir Haarde but I like his answers. And the one “not here on you BBC show” in particular.
And Stephen Sackur looks really cheap.
Great interview!!, i find interesting how Stephen Sackur corners Geir again and again, still he does not recognise his mistakes and try to blame the banks for their actions, he accepts that they know the risks but does not accept his actions and as a financial advisor he sucks, and how lame to try to blame Europe’s regulations, come on!! Geir the rapper does not rap!!
A good interview.
http://news.bbc.co.uk/1/hi/programmes/hardtalk/7885583.stm