6 ms·

> All the claims about Iceland doing things differently are useless I don't understand your comment. What Iceland did - allow its banks to default on their deb

by venus 13y ago

> All the claims about Iceland doing things differently are useless I don't understand your comment. What Iceland did - allow its banks to default on their debts - is completely different from what eg. Ireland did, ie. nationalise the debt. That it then nationalised the bankrupt banks is a different matter. It nationalised them, sure, after they defaulted on the debt.

joe_the_user 13y ago
No, Iceland banks didn't collapse, the government nationalized them to prevent their collapse. (Edit: as another poster mentions a portion of the debt was paid down by other states too. Again, that's a detail, not a fundamental difference). Some foreign-deposit operations did collapse but the bulk of the banks, their shares and national operations, were protected by the state. "The Financial Supervisory Authority (FME) has acted to "ring-fence" the Icelandic operations of Landsbanki and Glitnir, stating its aim of "continued banking operations for Icelandic families and businesses."[126] NBI (originally known as Nýi Landsbanki) was set up on 9 October with 200 billion krónur in equity and 2,300 billion krónur of assets.[127] Nýi Glitnir was set up on 15 October with 110 billion krónur in equity and 1,200 billion krónur of assets.[128] Talks with Icelandic pension funds to sell Kaupthing as a going concern broke down on 17 October,[129] and Nýja Kaupþing was set up on 22 October with 75 billion krónur in equity and 700 billion krónur of assets.[130] The equity in all three new banks was supplied by the Icelandic government, and amounted to 30% of Iceland's GDP...." http://en.wikipedia.org/wiki/2008%E2%80%9311_Icelandic_financial_crisis#Bank_restructuring http://en.wikipedia.org/wiki/2008%E2%80%9311_Icelandic_finan...
- hessenwolf 13y ago
  That a portion of their debt was paid by other states is the key. Ireland swallowed all of the bank debt, and Iceland did not. There is not a day that goes by in which that is not considered in Ireland.
  - levosmetalo 13y ago
    No, it's not Icelands debt paid by other states, it is a debt of Icelandic private bank that is paid out by other states. Why do you think that Iceland has more obligation to pay up a debt of icelandic _private_ bank than, say, Romania or Zimbabwe? Iceland never claimed any kind of insurance of foreign deposits, so was not in any way obliged to pay them up.
    - hessenwolf 13y ago
      I think we agree, but my semantics were less than top notch.
    - radiowave 13y ago
      But is it really as simple as that? The UK's position (AIUI) was that membership of the European Economic Area means that Iceland can not treat its own citizens' savings differently than those of other EEA member states' citizens. Hence the whole squabbling about repayment and such, which is still ongoing.
      - levosmetalo 13y ago
        Yes, UK's position ;) But I guess UK's position is based on interests of affected UK citizens, and doesn't have to be valid. I guess there are different ways to read these EEA treaties and regulations than what UK and Netherlands says, otherwise Iceland would be kicked out long ago for non-compliance.
        radiowave 13y ago
        That's true, but I think there's a long way to go yet before it's all nailed down.
- ddebernardy 13y ago
  You are so wrong on so many levels that it's scary. > Iceland banks didn't collapse, the government nationalized them to prevent their collapse. (Edit: as another poster mentions a portion of the debt was paid down by other states too. Again, that's a detail, not a fundamental difference). It is a fundamental difference. When Iceland took over its banks, it basically said: your deposits are insured if you are a tax-payer. Customers living elsewhere, share holders and (non-Icelandic?) bond holders were wiped out; they were owed something one day, zero the next, and it matters little to Icelanders who may have generously picked up the tab -- they didn't. The banks were recapitalized when needed, and a few bank execs got thrown in jail for good measure. I beg to ask how this is in any way similar to what happened in the US, the UK or Ireland. Or Greece, for that matter.
  - fleitz 13y ago
    FDIC insured accounts were protected, as for letting banks fail and wiping out shareholders... did you hold any bearstearns stock? Also, Bernie Madoff went to jail...
    - grey-area 13y ago
      Bernie Madoff was not a bank exec and was not involved in or the cause of the financial crisis, he was just exposed by it as the tide went out. All the devils are here has a nice history of this financial crisis, I thought, and no-one who was involved in the fraud which caused the collapse of AIG, for example, was convicted, though there have been some investigations, AFAIK. Also Iceland defaulted on its external debt and only protected national interests - the UK and US didn't really do anything similar, they have chosen to inflate their way out of debt instead.
      - arethuza 13y ago
        I don't think it was fraud that caused AIG problems, it was making really bad business decisions. Meanwhile, Joseph Cassano the guy at AIG FP London responsible for a lot of the problems walked away with at least $280 million http://www.telegraph.co.uk/finance/financialcrisis/3225213/AIG-trail-leads-to-London-casino.html http://www.telegraph.co.uk/finance/financialcrisis/3225213/A...
Lazare 13y ago
Ireland is actually the exception; they were the only country to do that. The consensus of mainstream economics at the time was "holy shit are you fucking nuts?", and I don't think it looks any more sane with the benefit of time.
- sentenza 13y ago
  Actually, not quite. Spain hasn't nationalized the debt directly but instead, since the beginning of the crisis, is continuously pumping money into banks that should have gone under. It is ruinous to Spain's public finances, but we don't hear so much about it, since the relative size of that particular debacle is smaller than the Irish "public finances suicide by banking".
  - omegant 13y ago
    The spanish banks more exposed to the construction bubble bust were the "cajas". They are not for profit saving banks, and not private, they are controlled by politicians and unions. They have saved them because they had huge holes created giving high risk loans to the friends of the political parties heads. Une big example is Bankia (previously caja madrid), the president of bankia was a friend of Aznar and certainly underqualified. His last big hole was the sale of a prefered stock emission to small savers and old people(no big financial entiy bought those), to save the caja from default. They made people think that they were saving products, they've lost 90% of the invested quantity. There are other cases of billions of € in credits to construction companies that were unable to repay, the high manager in charge of the operation joining thd board afterwards... Private banks like santander or BBV are not that exposed to the construction bubble, they are not the ones that need a bailout. It's a big shame..
- patrickk 13y ago
  The consensus of almost everyone, from mainstream economists to the man on the street was (and continues to be) that the Irish bank bailout was insane. Bailing out unsecured bank bond holders is madness. There was some extremely murky political reasons why the bailout happened[1]. Debt-to-GDP ratio has skyrocketed to north of 125% (from well under 100% and yearly surpluses), huge unemployment etc. [1] http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103 http://www.vanityfair.com/business/features/2011/03/michael-...

by venus 13y ago

joe_the_user 13y ago

No, Iceland banks didn't collapse, the government nationalized them to prevent their collapse. (Edit: as another poster mentions a portion of the debt was paid down by other states too. Again, that's a detail, not a fundamental difference). Some foreign-deposit operations did collapse but the bulk of the banks, their shares and national operations, were protected by the state. "The Financial Supervisory Authority (FME) has acted to "ring-fence" the Icelandic operations of Landsbanki and Glitnir, stating its aim of "continued banking operations for Icelandic families and businesses."[126] NBI (originally known as Nýi Landsbanki) was set up on 9 October with 200 billion krónur in equity and 2,300 billion krónur of assets.[127] Nýi Glitnir was set up on 15 October with 110 billion krónur in equity and 1,200 billion krónur of assets.[128] Talks with Icelandic pension funds to sell Kaupthing as a going concern broke down on 17 October,[129] and Nýja Kaupþing was set up on 22 October with 75 billion krónur in equity and 700 billion krónur of assets.[130] The equity in all three new banks was supplied by the Icelandic government, and amounted to 30% of Iceland's GDP...." http://en.wikipedia.org/wiki/2008%E2%80%9311_Icelandic_financial_crisis#Bank_restructuring http://en.wikipedia.org/wiki/2008%E2%80%9311_Icelandic_finan...

hessenwolf 13y ago
That a portion of their debt was paid by other states is the key. Ireland swallowed all of the bank debt, and Iceland did not. There is not a day that goes by in which that is not considered in Ireland.
- levosmetalo 13y ago
  No, it's not Icelands debt paid by other states, it is a debt of Icelandic private bank that is paid out by other states. Why do you think that Iceland has more obligation to pay up a debt of icelandic _private_ bank than, say, Romania or Zimbabwe? Iceland never claimed any kind of insurance of foreign deposits, so was not in any way obliged to pay them up.
  - hessenwolf 13y ago
    I think we agree, but my semantics were less than top notch.
  - radiowave 13y ago
    But is it really as simple as that? The UK's position (AIUI) was that membership of the European Economic Area means that Iceland can not treat its own citizens' savings differently than those of other EEA member states' citizens. Hence the whole squabbling about repayment and such, which is still ongoing.
    - levosmetalo 13y ago
      Yes, UK's position ;) But I guess UK's position is based on interests of affected UK citizens, and doesn't have to be valid. I guess there are different ways to read these EEA treaties and regulations than what UK and Netherlands says, otherwise Iceland would be kicked out long ago for non-compliance.
      - radiowave 13y ago
        That's true, but I think there's a long way to go yet before it's all nailed down.
ddebernardy 13y ago
You are so wrong on so many levels that it's scary. > Iceland banks didn't collapse, the government nationalized them to prevent their collapse. (Edit: as another poster mentions a portion of the debt was paid down by other states too. Again, that's a detail, not a fundamental difference). It is a fundamental difference. When Iceland took over its banks, it basically said: your deposits are insured if you are a tax-payer. Customers living elsewhere, share holders and (non-Icelandic?) bond holders were wiped out; they were owed something one day, zero the next, and it matters little to Icelanders who may have generously picked up the tab -- they didn't. The banks were recapitalized when needed, and a few bank execs got thrown in jail for good measure. I beg to ask how this is in any way similar to what happened in the US, the UK or Ireland. Or Greece, for that matter.
- fleitz 13y ago
  FDIC insured accounts were protected, as for letting banks fail and wiping out shareholders... did you hold any bearstearns stock? Also, Bernie Madoff went to jail...
  - grey-area 13y ago
    Bernie Madoff was not a bank exec and was not involved in or the cause of the financial crisis, he was just exposed by it as the tide went out. All the devils are here has a nice history of this financial crisis, I thought, and no-one who was involved in the fraud which caused the collapse of AIG, for example, was convicted, though there have been some investigations, AFAIK. Also Iceland defaulted on its external debt and only protected national interests - the UK and US didn't really do anything similar, they have chosen to inflate their way out of debt instead.
    - arethuza 13y ago
      I don't think it was fraud that caused AIG problems, it was making really bad business decisions. Meanwhile, Joseph Cassano the guy at AIG FP London responsible for a lot of the problems walked away with at least $280 million http://www.telegraph.co.uk/finance/financialcrisis/3225213/AIG-trail-leads-to-London-casino.html http://www.telegraph.co.uk/finance/financialcrisis/3225213/A...

Lazare 13y ago

Ireland is actually the exception; they were the only country to do that. The consensus of mainstream economics at the time was "holy shit are you fucking nuts?", and I don't think it looks any more sane with the benefit of time.

sentenza 13y ago
Actually, not quite. Spain hasn't nationalized the debt directly but instead, since the beginning of the crisis, is continuously pumping money into banks that should have gone under. It is ruinous to Spain's public finances, but we don't hear so much about it, since the relative size of that particular debacle is smaller than the Irish "public finances suicide by banking".
- omegant 13y ago
  The spanish banks more exposed to the construction bubble bust were the "cajas". They are not for profit saving banks, and not private, they are controlled by politicians and unions. They have saved them because they had huge holes created giving high risk loans to the friends of the political parties heads. Une big example is Bankia (previously caja madrid), the president of bankia was a friend of Aznar and certainly underqualified. His last big hole was the sale of a prefered stock emission to small savers and old people(no big financial entiy bought those), to save the caja from default. They made people think that they were saving products, they've lost 90% of the invested quantity. There are other cases of billions of € in credits to construction companies that were unable to repay, the high manager in charge of the operation joining thd board afterwards... Private banks like santander or BBV are not that exposed to the construction bubble, they are not the ones that need a bailout. It's a big shame..
patrickk 13y ago
The consensus of almost everyone, from mainstream economists to the man on the street was (and continues to be) that the Irish bank bailout was insane. Bailing out unsecured bank bond holders is madness. There was some extremely murky political reasons why the bailout happened[1]. Debt-to-GDP ratio has skyrocketed to north of 125% (from well under 100% and yearly surpluses), huge unemployment etc. [1] http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103 http://www.vanityfair.com/business/features/2011/03/michael-...