The last few weeks I have been following the Icesave soap with much interest. Last year the Dutch and UK governments honoured claims worth 5 billion Euro’s to compensate for savings that were lost by citizens of both countries when the Icesave (Landsbanki) bank went bankrupt. Now they want that money back from the Iceland government.
All very logical, it was after all an Iceland bank, regulated by the Iceland authorities. When things went bad the Iceland government even took control of the bank. But then again, the UK and Dutch banking authorities gave Icesave the thumbs up as well when it aggressively entered both markets in 2007. In both countries the savings were guaranteed by national depositor protection schemes.
It is clear that the Icesave bankers failed. And so did the regulatory agencies in Iceland, the UK and the Netherlands. But can we blame the Iceland population for the billions that have gone missing? Are the fisherman, shopkeeper and truck driver from Reykjanesbaer responsible for mismanagement by a few bankers?
Still, we expect the Iceland population to pay up in excess of 12.000 euro per person to compensate for the financial mess that the bankers created. After a petition that was signed by over a quarter of the population, president Grimsson rightfully refused to sign a bill to repay these billions. This immediately evoked strong reactions from Dutch Finance Minister Bos and UK Tresury Minister Lord Myners. Paying up is even linked to Iceland joining the EU. Fortunately for them, the Iceland population will have a final say on the matter in a March 6th referendum.
If I were an Icelander I would definitely vote against the bill. Why should I feel more responsible for this financial mess than the global banking industry? What about the bankers of Goldman Sachs, JP Morgan Chase and Morgan Stanley that are expected to cash in around 28.5 billion dollars in bonuses over 2009? Why don’t we hold the international banking community accountable instead of 316.960 Icelanders that have nothing to do with the matter? OK, maybe subtract 10 from that number.
I suppose it is easier to pick a fight with Iceland than with these big powerful international banks. The treasury ministers are too close with the bankers to even propose such a thing. Furthermore, there is no legal ground whatsoever to put it into effect. But all of that doesn’t make it any less logical. Or honourable.
I wonder what would happen if we - in the Netherlands and the UK - would hold a referendum on who should pick up the tab of the bailout of Dutch and UK savers. Would there be support for a bill to make the bankers use future profits to compensate our governments instead of the Iceland population?
Critics will say that such a bill is unrealistic. Could well be. But expecting the Iceland population to pay up could be just as unrealistic. We will know after the Iceland referendum. Whatever the outcome, the system of privatising profits in the pockets of bankers and socialising losses through government support has to be stopped. There is no logic behind such a system. At some point the population will start to rebel, and the Icelanders may well be the first.
Given the hundreds of billions of public funds that have gone into bailing out the banks it is incredible that the whole discussion on bank support hasn’t been much more aggressive. Many people appear (want?) to believe that the financial system has been healed and that the economy is ready to boom again. We can continue where we left off two years ago! This assumption is false because of the simple fact that the underlying system is seriously flawed. Fractional lending, the moral hazard of governments bailing out banks, derivative trading worth many times the real economy, runaway speculation, and banks too big to fail are just a few problems woven into the system.
I hope that an Iceland ‘Nei’ on the 6th of March will trigger a bigger debate on who is responsible and who needs to pay up. The Iceland Vikings will be like that little village in Gallia that stood up to the mighty Roman Empire. I just hope the Icelanders have that same magic potion…
All very logical, it was after all an Iceland bank, regulated by the Iceland authorities. When things went bad the Iceland government even took control of the bank. But then again, the UK and Dutch banking authorities gave Icesave the thumbs up as well when it aggressively entered both markets in 2007. In both countries the savings were guaranteed by national depositor protection schemes.
It is clear that the Icesave bankers failed. And so did the regulatory agencies in Iceland, the UK and the Netherlands. But can we blame the Iceland population for the billions that have gone missing? Are the fisherman, shopkeeper and truck driver from Reykjanesbaer responsible for mismanagement by a few bankers?
Still, we expect the Iceland population to pay up in excess of 12.000 euro per person to compensate for the financial mess that the bankers created. After a petition that was signed by over a quarter of the population, president Grimsson rightfully refused to sign a bill to repay these billions. This immediately evoked strong reactions from Dutch Finance Minister Bos and UK Tresury Minister Lord Myners. Paying up is even linked to Iceland joining the EU. Fortunately for them, the Iceland population will have a final say on the matter in a March 6th referendum.
If I were an Icelander I would definitely vote against the bill. Why should I feel more responsible for this financial mess than the global banking industry? What about the bankers of Goldman Sachs, JP Morgan Chase and Morgan Stanley that are expected to cash in around 28.5 billion dollars in bonuses over 2009? Why don’t we hold the international banking community accountable instead of 316.960 Icelanders that have nothing to do with the matter? OK, maybe subtract 10 from that number.
I suppose it is easier to pick a fight with Iceland than with these big powerful international banks. The treasury ministers are too close with the bankers to even propose such a thing. Furthermore, there is no legal ground whatsoever to put it into effect. But all of that doesn’t make it any less logical. Or honourable.
I wonder what would happen if we - in the Netherlands and the UK - would hold a referendum on who should pick up the tab of the bailout of Dutch and UK savers. Would there be support for a bill to make the bankers use future profits to compensate our governments instead of the Iceland population?
Critics will say that such a bill is unrealistic. Could well be. But expecting the Iceland population to pay up could be just as unrealistic. We will know after the Iceland referendum. Whatever the outcome, the system of privatising profits in the pockets of bankers and socialising losses through government support has to be stopped. There is no logic behind such a system. At some point the population will start to rebel, and the Icelanders may well be the first.
Given the hundreds of billions of public funds that have gone into bailing out the banks it is incredible that the whole discussion on bank support hasn’t been much more aggressive. Many people appear (want?) to believe that the financial system has been healed and that the economy is ready to boom again. We can continue where we left off two years ago! This assumption is false because of the simple fact that the underlying system is seriously flawed. Fractional lending, the moral hazard of governments bailing out banks, derivative trading worth many times the real economy, runaway speculation, and banks too big to fail are just a few problems woven into the system.
I hope that an Iceland ‘Nei’ on the 6th of March will trigger a bigger debate on who is responsible and who needs to pay up. The Iceland Vikings will be like that little village in Gallia that stood up to the mighty Roman Empire. I just hope the Icelanders have that same magic potion…
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