Why I said NO to Icesave.

Now it is clear that Iceland has voted NO to the latest Icesave agreement. Many people may wonder why we do not want to fulfill "our international obligation" as it is sometimes called. This decision is not about that, it is about how we do it and it is about political incompetence in three countries. The main reason for saying NO yesterday is simply that our government wants to solve the dispute by letting the taxpayers pay for it, instead of the owners of Landsbanki, the people who were responsible for the money put into the Icesave savings accounts.

I can promise that almost every person in Iceland wants UK and Dutch Icesave victims to get their money back. And this is how it should be done:

First, the owners and directors of Landsbanki must pay with all their assets,
then the assets of the fallen banks should be used to repay the Icesave money, and at last if this is not covering the losses, then UK, Dutch and Icelandic governments should make an agreement about the rest.

This is what the agreement should be about. And all the governments involved should join hands in investigating and tracing the stolen money as fast as possible. That way everyone will get his money back as fast as possible!

Nobody has to fear that Iceland do not want to pay for Icesave. This is only a matter of responsibility and justice and how it is done. All the governments involved in the Icesave agreement we voted on yesterday have failed. The Icelandic government is willing to pay for the criminals in the bank, which include Icelands now richest man Bjorgolfur Thor Bjorgolfsson, without letting the banksters pay anything!

The UK government has failed, they started brilliantly when they used the terrorist act to shut Landsbanki down in 2008, and then failed when they did nothing more. They should have gone further and used the terrorist act to arrest the owners and directors of Landsbanki and keep them in custody until it was clear what this Icesave fraud was all about!

The Dutch government seems to have done nothing at all except blame the public of Iceland for the mess.

All those governments have failed and no person with some common sense can vote for an agreement about letting taxpayers alone pay for the mess.

The agreement we voted on yesterday excluded the owners and directors of Landsbanki from paying anything at all. That is why we said NO.

We are still willing to make a deal with the UK and Dutch governments about Icesave, it simply must be based on the order mentioned above and common sense. We want fairness for the people in Iceland and UK and Holland, but it is not possible unless we sacrifice a few banksters first!!

Stærsta vél Boeing í Keflavík

Athugasemdir

[Nökkvi Johannesson (IP-tala skráð) 10.4.2011 kl. 11:10]

Sæll Jón Pétur.

Góður pistill hjá þér, þú þyrftir nú að pósta honum (eða linka) á spjallið í Guardian, bbc og FT. Það eru svo flottar umræður á þessum commentarásum, verst hvað þær eru stuttar.

MBK

[Jón Pétur Líndal, 10.4.2011 kl. 11:12]

Sæll Nökkvi og takk fyrir þessa ábendingu. Þetta er reyndar akkúrat það sem ég er að gera. Og það er gaman að sjá að t.d. á BBC núna eru margir Íslendingar að taka þátt í umræðunni.

Kveðja,

Jón P. Lindal.

[Einar Steinsson, 10.4.2011 kl. 11:45]

En hvað kemur þessi pistill Boeing 747 við??

[Jón Pétur Líndal, 10.4.2011 kl. 11:54]

Sæll Einar. Góð athugasemd hjá þér, það er bara alveg óvart að þetta hangir við Boeing fréttina. Ég er sennilega með Bjarna Harðarsonar syndrómið og hef gert einhverja vitleysu á tölvunni!!

[RebelEconomist (IP-tala skráð) 10.4.2011 kl. 15:49]

Followed across the Telegraph website.  You can't just make repaying the British and Dutch conditional on confiscating the assets of Landsbanki directors.  These things have to follow legal process.  Iceland should repay the British and the Dutch the aggregate compensation promised by its deposit protection scheme because that was the understanding that allowed Icelandic banks access to the European single market.  And if you can prove that the Landsbanki directors committed crimes in Iceland, and those crimes permit the government to appropriate their assets, then do so.  I am sure if you want Britain to extradite anyone involved, we will gladly send them back!

While I was no fan of the previous Labour government, I honestly don't think that they did anything wrong in this case, and as far as I know, neither did the Dutch.  They were powerless to prevent Icesave taking deposits in the UK because EEA law - which Iceland signed up to - required them to accept that Iceland had the "competence" to regulate Landsbanki branches and "had ensured" an adequate deposit protection scheme.

[MargrétJ (IP-tala skráð) 10.4.2011 kl. 16:44]

Flottur pistill.  Ég hef eytt nánast öllum deginum í að útskýra fyrir erlendum vinum og fjölskyldu hvað málið snýst um.  Blessaður settu þetta líka á spjallið hjá Wall street journal og Financial Times - og bara sem allra allra víðast.

Má svo benda á að Svíþjóð er eitt af fáu löndum sem þau lög eru í gildi að skattgreiðendur borga ekki skuldir einkabanka. http://www.riksbank.com/templates/Page.aspx?id=46478

Það skiptir öllu máli fyrir okkur að löggjöfin á Íslandi verði algerlega með það á hreinu að einkabankar fá ekki krónu frá skattgreiðendum, fari þeir á hausinn.  Svo ætti að vera eftirlitsnefnd með öllum bönkum þar sem þeir þurfa að tryggja daglega að í innistæðutryggingasjóði sé nægt fé.

[Jón Pétur Líndal, 10.4.2011 kl. 16:47]

Hello RebelEconomist and thanks for the comment.

The best prove so far that some crimes were committed in Landsbanki was when the UK government used the terrorist act to shut down the bank! What more prove do we need? Would any government use such a serious act unless something unlawful was going on in the bank? I do not think so. You must keep in mind that banks are mainly dealing with money, not explosives, and that makes my argument even stronger. It is no like there was some risk of killing somebody in the bank, and still the UK government decided to use the terrorist act to shut it down.

I agree with you that we must follow legal process in this case. And that also means that if we take no action against the bankers it implicates there was nothing legally wrong going on in the bank. If nothing was wrong it is of course not right to say yes to pay for the debts of the bank and the losses of the customers of the bank. Then it is just a normal thing to loose the money if nothing was wrong in the bank. The most important part in the legal process is of course to investigate the bank and put on trial the bankers who received the money. We just can not skip this part of the process and go directly to taxpayers crying out for compensation. But both the Icelandic and UK governments do not seem to care much about this part of the legal process. There is the big problem in this case.

[Jón Pétur Líndal, 10.4.2011 kl. 16:48]

Takk Margrét, ég er að koma þessu á framfæri sem víðast.

[RebelEconomist (IP-tala skráð) 10.4.2011 kl. 17:37]

You are welcome Jon Peter Lindal.

Britain did not use anti-terrorist legislation to shut down Icesave.  It did use a freezing order, most recently included in anti-terrorist legislation, to stop Icesave's assets being transferred.

Deposit protection exists to protect small investors in the event that a bank becomes insolvent.  Insolvency is not always a result of crime.

Points such as these are dealt with in more depth here: http://reservedplace.blogspot.com/2010/03/on-thin-ice.html

I am afraid that Margaret is badly misinformed.  Her link says that bank shareholders, not depositors, are not protected.  Although Sweden's approach to its banking crisis has been compared favourably with TARP etc, in fact by nationalising its banks, Sweden ensured that no depositor or bondholder lost an ore - as in Ireland.

[Jón Pétur Líndal, 10.4.2011 kl. 18:30]

Dear RebelEconomist.

Deposit protection was active in Iceland as required by the EU legislation. Iceland is not avoiding to pay according to that legislation. The dispute has risen because the deposit protection system is not good enough to cover all the losses in this case. There fore people need to cover their losses in some other way and instead of going to the banksters to get the money back our governments are trying to punish the taxpayers by letting them pay the rest of the loss.

If the UK government used anti-terrorist legislation or a freezing order which is included in that legislation as you state is not the big issue in this case. But it still leaves us with the question why they did nothing more about this money transfer. Why did they not follow it up with a proper investigation and by arresting the people suspected of illegal money transfer?

I think it does not really matter if the insolvency of Landsbanki was the result of crime or stupidity. Any way a proper investigation is the only way to figure out the true reason for the insolvency. Until that has been investigated and dealt with it in a proper way it is not right to collect the money from the taxpayer.

In Iceland most of the population has lost a lot of money on the bank crash. Many people have lost everything. At the same time the main owner of Landsbanki is still the richest man in Iceland, worth more then $1 billion. Why is he so rich and why have the others lost so much? Does he smell of Icesave money or does the people who lost everything? We have to use some common sense in this case. It makes no sense to argue about if Icelandic taxpayers should pay or if UK depositors should loose and at the same time we can all see that the guy behind Icesave has more than enough money to make a full repayment to the depositors.

[RebelEconomist (IP-tala skráð) 10.4.2011 kl. 19:26]

It is normal that deposit protection schemes do not hold sufficient assets to cover the failure of a sizable bank, but the idea is that, in the event of a default, they borrow the money, if necessary from the government, to make the promised compensation payments, and repay out of future deposit insurance fees.  Since a key function of deposit insurance is to prevent bank runs, it is essential that compensation is (a) prompt (paid within three months according to the European law, except in "wholly exceptional circumstances") and (b) assured.  It cannot wait for an investigation.

No matter how much money the former owner of Landsbanki may have, I would be surprised if Icelandic law allowed you to just take it without showing that he committed a crime!

[Jón Pétur Líndal, 10.4.2011 kl. 20:04]

It is correct what you state, the idea of the system is to prevent bank runs. But banksters are misusing this system. They trust that what ever they do, the governments will save their asses. That is wrong, someone has to stop that.

This system is only leading to higher interest rates and more risk for everyone when the competition for people savings makes banksters offer unrealistic interest rates in order to collect endless money. This deposit protection system is just a part of a unsustainable financial system that is now killing the states of Europe financially, one by one. Putting more debts on taxpayers and more money to the banksters is wrong.

We need to fix the system, not punish taxpayers for the faults it has. The first step in fixing the system should be to hold banksters responsible for their actions. I do not really care if the stole the money or lost it because of stupidity. They got it, they must return it.

Bankers and banksters have been very successful in making people believe that deposit protection schemes and governments are responsible for all bank deposits, private or not. They have managed like magicians to convince lot of people and governments that banks should be excluded from all the rules of free market and at the same time they are free to do whatever they want at whatever the price they charge and send the bill to taxpayers every time they fail. This can not go on forever. We said NO to this here in Iceland yesterday.

I can tell you that here in Iceland we have new banks based on the remains of the old ones, with the same people aboard as the old banks and the same course as the old banks. The new banks are already too big for Iceland. We are facing another bank crises here within very few years if we do not fix the financial system.

People survive because they have food to eat, have a house to live in and clothes and education and health system and some work to provide income for those basic needs. Not because they bail out banksters living in their own world of greed and more money than they can ever use.

[RebelEconomist (IP-tala skráð) 10.4.2011 kl. 21:06]

Deposit protection schemes do not bail out bankers; they bail out small depositors.  If a bank fails, both shareholders and employees lose their entire stake in the bank.  In fact, to the extent that deposit insurance payouts are recovered in fees from the surving banks, deposit protection schemes actually give bankers an incentive to report the reckless behaviour of other banks to the regulators.  No doubt bankers do use the existence of deposit insurance to attract depositors, but it is important that depositors do believe in deposit insurance if runs are to be avoided.

I suspect that what Icelanders really voted against yesterday is the idea that something that they were barely aware of and had little interest in could result in them being presented with a bill large enough to make life noticeably worse.  Unfortunately, that is democracy - the people are accountable for the mistakes of the representatives they elect and the public servants they hire.

The true test of whether Iceland really does reject the idea of government backing for deposit insurance schemes will be if the Icelandic bank regulator warns present depositors in Icelandic banks that their deposits are not insured (beyond the negligible coverage provided by paid-in insurance fees).  If they do, I would expect the Icelandic banks to go rapidly out of business if foreign banks from countries with strong deposit protection schemes are allowed to compete for the Icelandic banking market.