Iceland’s fourth bank was nationalized this morning: Straumur-Burdarás, which as it happens was also owned by the two Björgólfurs.
Straumur Burdarás was primarily an investment bank – indeed I was under the impression that it was exclusively an investment bank, but according to news reports this morning it was licensed to operate as a commercial bank and thus covered by the deposit insurance fund.
It is also the only bank [or company, for that matter] in which I owned shares. Not that it was exactly intentional – I originally made the investment years ago [around 1995 I believe] when they were offering tax rebates for anyone who invested a minimum of ISK 120,000 [just over USD 1,000 at the current rate] in the stock market. Somehow I’d managed to save up that money [despite being a single mom on a scandalously low salary] and I thought it sounded like a pretty good investment.
If I recall correctly the money went into some sort of fund and throughout the years was shifted hither and thither until the majority of the shares were in shipping company Eimskip, which was later sold to the [toxic] Björgólfurs and was given the name Burdarás. Somehow that company was poured into a bank called Straumur, hence the name Straumur Burdarás. In the end, without exactly knowing how, I had a share in the bank.
For a while it seemed like a sweet deal – at the height of the boom, around two years ago, that original investment rose to around ISK 330,000 [USD 3,000]. Meanwhile, the last time I checked that original ISK 120,000 investment from fourteen years ago had dropped to to somewhere around ISK 17,000 [USD 150].
Losing cash is always a drag, of course, but it’s not like I’m losing sleep – like a good friend remarked the other day “it was just numbers on a screen” – and all the important things in my life are still in place – my family, health, home, even work. In other words it’s not like I’m in the same position as the people who will lose their jobs as a result of the demise – around 150 people in the UK according to mbl.is, and presumably a number here in Iceland, as well. And obviously we are yet to see the implications for our wee economy – another failed bank means more debt to take on. That is, unless the money is recovered from the Björgólfurs …
…AND ON THAT NOTE
I urge anyone with an interest in Iceland’s current predicament, or the global economy, or tax havens, or above all TRUTH and JUSTICE, to check out this fantastic interview with Eva Joly in Silfur Egils yesterday [NB there's a better - i.e. less wiiiide - version of it over on Lára Hanna's blog]. Joly is a remarkable woman with an amazing career who has led investigations into many of the most heinous economic crimes in the world, and who has endured all manner of threats [death and otherwise] as a result. This soft-spoken woman is seriously committed to truth and justice and the interview with her is one of the best I have seen in recent months – and raises a lot of questions about the looting of economies throughout the world.
SUNNY AND STILL WINDY
Weatherman promises a respite from the icy blasts this afternoon, meaning we’ll have a gorgeous day. It’s currently right at the freezing mark [32F], the sun came up at 8.07 and will go down at 7.11 this evening.
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Doubt any money will be recovered from the Bjorgolfurs! The “jewel” in Bjorgolfur Thor’s empire , Actavis, looks like it’s heading for a massive loss – He owes A German bank 5billion Euros and looks like struggling to gets bids anywhere near that amount.Bjorgolfur Gudmundsson is dragging on the sale of West Ham United, whose holding company Hansa happens to owe Straumur £90m, MP Bank £15m, others approx £5m and ,here’s the best bit, himself £100m!!
Martin – yes, but in the last few days a few things have come to light about Björgólfur jr.’s offshore accounts. Dude’s got money stashed in ALL the main tax havens.
I wonder how many more Icelandic banks are at risk of nationalisation… The creeping nationalisation of large banks across the world is inevitable (eg yesterday the UK government increased its stake in Lloyds to majority ownership). There’s a lot to be said for following Sweden’s successful solution in the 1990s (ie completely nationalise the weak banks, restructure them, and then privatise them; see http://www.clevelandfed.org/research/PolicyDis/pdp21.pdf for more detail), rather than following Japan’s unsuccessful approach of drip-feeding the banks for years – which both the UK and US is currently following…
The economic woes are a tad worrying here, but I can’t imagine what it is like in Iceland. I like your attitude, everything you hold dear is fine.
V.
Speaking of interviews, seems your interview missed the cut in last week’s “Letter from Iceland” in The New Yorker. Interesting article, doesn’t appear to be on-line.
Takk for the link to the Eva Joly interview, I only recently became aware of her through a Dutch TV special on her life and career so far, and she seems to be a really remarkable person with a lot of relevant insight into what’s going on in international finance today.
The most important thing from that entire interview, in my opinion, was when she reiterated the importance of civil society. Civil society, society independent of the government and media, is the only way to go forward in solving most of the issues facing the world this century. I share Eva’s optimism that Iceland can break through the obstacles that are impeding the truth being known. Obviously what happened in Iceland is not unique to Iceland, these financial practices are found all over the world, and Iceland has a unique chance to show the world how dangerous these widespread practices are, and how countries that feel like there are no problems, that feel like they have an open media, really don’t. That’s one of the main reasons I got so annoyed at Iceland-bashers after the bank collapses – it’s hubris to think that what the Icelandic elite did isn’t being done in the USA, Canada, Hong Kong, the UK, Ireland, [insert every single country on Earth here]. It’s being done now, and trillions of public dollars/pounds/yen/roubles/rupees/yuan/whatever are being given to directly to crooks, who have a history of taking care of themselves rather than their duties. That is why it’s so important for the regular people of the world to watch Iceland, in my humble opinion.
James – there aren’t that many banks left to nationalize – the four main ones have all been taken over.
V. – one has to have one’s priorities straight, no?
Peter – must be because of all those things I told him off the record.
Kelp – yes, that interview with Eva Joly was a great eye-opener for me. For example I would not have gone so far as to think that there were two parallel economies in the world – the legit and the illegit. And obviously everything she said relating to Iceland – including how crucial truth and justice are in the whole scheme of things – was very inspiring.
I think you’ve got a very good attitude about your financial loss, but I’m still sorry that it happened.
“An opportunity for transformation.”
I happened upon this article in ‘National Geographic’:
http://ngm.nationalgeographic.com/2008/03/iceland/del-giudice-text
which seems perhaps to express the dilemma in part the people of Iceland are presently facing. Which way forward?
Since I know it, I’ll speak from the United States perspective, feeling the experience of this nation and others might serve as example and warning. We have gorgeous national parks but they are only small, ‘managed’ islands within a land that bares only a passing resemblance to the wild beauty it once possessed. It has been developed and divided into fences, spreading tract shopping malls and houses, ever so many roads, and the remnants of industries that allowed this, now often empty save the lingering toxic pollution.
And where are we now? In a deep recession no one can see the bottom of. More and more people are losing jobs that in many cases barely supported them to begin with. Of the more fortunate, most but one serious illness away from bankruptcy and worse due an unhealthy healthcare system. Many people are increasingly asking why, prompted now in desperation to at last look more deeply, and are beginning to see so much of this, their houses which have declined to much from overinflated value, and all the rest but one big ponzi scheme. It is the American way. Ever bigger and better. Not so much the better part, but certainly bigger and ever more. Growth at all cost. This advertised and simply accepted as good and right. But perhaps now the faintest understanding this advocated by government and industry as it serves their interests in the short term. But it is not balanced or sustainable. Never mind. As long as there is more and ever more no one will notice.
And once it stops. Now we do. All the many without roofs over their head, and more joining them every day. In fear of this, of becoming sick even as their diet insures it, of endless enemies we must always protect against. The essential nature of this pyramidal system that insures fabulous riches to a few that the many so far below can aspire to but in reality never attain. So now we see just a bit of all that has been wrought and its true nature. And most would happily be blind if able once more to live the illusion of the American way. Their children can deal with the mess later.
Alda wrote:
> Not that it was exactly intentional – I originally made the investment
> years ago [around 1995 I believe] when they were offering tax rebates
> for anyone who invested a minimum of ISK 120,000 [just over USD
> 1,000 at the current rate] in the stock market. Somehow I’d managed
> to save up that money [despite being a single mom on a scandalously
> low salary] and I thought it sounded like a pretty good investment.
Only invest in something you truly understand.
It’s fair, I suspect, to characterize a lot of what has happened in terms of people putting money into something which sounded good and felt good but which they didn’t actually understand.
If a person invests in something they don’t truly understand, then they’re taking risks that they are unaware of.
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