According to a report on the RÚV evening news, the Financial Supervisory Authority has so far sent ten cases to the office of the special investigator of the bank collapse, and five more are imminent. The FSA also expects to send 15 more cases [at least] to be investigated before the end of the year. These involve insider trading, market manipulation and high-risk lending.
I imagine that loans that Kaupthing gave to one Robert Tchenguiz just prior to the bank’s collapse falls under that last category. Tchenguiz was one of the bank’s favoured clients – unsurprisingly, since he was a close business associate of Kaupthing’s owners, owned shares in their companies, and indeed, owned about 1.5 percent in the bank about two years ago. Tchenguiz was a shrewd and hard-nosed businessman who was flying high at the height of the financial boom. He owned assets throughout the UK and, indeed, Europe – including Iceland [in Exista, the largest shareholder in Kaupthing].
However, in late 2007 his luck began to turn, he started suffering heavy losses, amounting to hundreds of millions of pounds Sterling. By the time the credit crunch hit in late 2008 it is unlikely that Tchenguiz would have been able to secure credit anywhere – except from his pals at Kaupthing.
Indeed, Kaupthing kept lending Tchenguiz large amounts – tens of billions of ISK – right up until its collapse in October 2008. The British press even reported that he’d lost a cool billion pounds the day before Kaupthing collapsed. At the same time, it was virtually impossible for Icelandic companies to secure loans from the bank.
In total, Kaupthing loaned its owners – including the brothers Ágúst and Lýður Guðmundsson, Ólafur Ólafsson, and the aforementioned Tchenguiz, a grand total of ISK 500 billion in the months preceding Kaupthing’s collapse. Much of that money was loaned to holding companies registered in tax havens [note]. Just to put that figure into perspective, the biggest construction project in Icelandic history – the massive Kárahnjúkavirkjun power plant in East Iceland [that I wrote about here] – cost ISK 100 billion, a sum that seemed mind-bogglingly huge just a few short years ago.
People: the Icelandic banks were completely gutted by their owners and we – normal, hard-working Icelandic citizens – are left with the remains … and all the debts. Debts that were incurred by companies in the private sector, and for which there was never any sovereign guarantee. Debts in such colossal amounts the the mind boggles just thinking about it.
Does that make ANY sense?
It’s enough to drive one to distraction. Seriously. Sometimes I could just go outside and SCREAM …
… INTO THE WIND
Of which there has been PLENTY. Seriously, what is it with the stormy weather? Is it a by-product of the kreppa? I’m starting to wonder. It was stormy yesterday, is stormy today. Will probably be stormy tomorrow. And the next day. Anyway, temps are 9°C [48F], sunrise/sunset same as the last post.
* The title, of course, is a reference to the book mentioned in this post.
{ 15 comments… read them below or add one }
Why did Viking raiders rob banks? Because that’s where the money was.
Where are those people now? All off to Russia or escorting their loot in some Caribbean hideaway? I’m particularly still bearing a grudge against those irresponsible bankers, who put up the Kaupthingedge savings accounts in Germany, feigning the illusion of a sound bank at a time, when they were no longer able to secure loans from other banks, in order to grab the savings of private individuals. Unlike the Kaupthing Singer & Friedlander accounts in the UK, those accounts in Germany had been set up as branch solution under EEA law, by this directly putting Icelandic savers in jeopardy as well.
Ljósmynd DE, well it was on the news just a few weeks ago that Kaupthing’s assets cover the Edge accounts in Lux and Germany. Also it’s very likely that Deutsche Bank (who owns quite a bit of old Kaupthing’s debts) will get to own a large chunk of new Kaupthing. Which I think is a pretty big step towards building trust in our banks again. Better to have an established and trustworthy bank as owner than those x!”##$ viking bastards!
Hopefully some of these criminals – because is what they are – will end up in prison. Iceland may not get any of the money back – but seeing the perpetrators behind bars may give some satisfaction. Do you think so? How do things feel now? Can you see the demos starting up again?
I wouldn’t care about prison or any sense of justice, they will get theirs someday. Justice for me is getting as much of that money back so the rest of us/ya’ll don’t have to pay for it.
So how is it that us mortals have to pay back loans even at double the original rate but the billionaires don’t? This is the a good case for defaulting, just like the big boys. Demand that the billions ‘loaned’ to the insiders be paid back before paying your own. I’d put all the criminal investigations and other lip service and politics secondary to getting the actual money back.
How many yanks still feel that justice was done when the Enron mafia went to jail? Your money is still lost and you still have to pay back your loans.
This post gives seems to give sense and clarity to Michael Hudson’s arguement/viewpoint about Iceland simply not repaying debt…
LDE – The two Kaupþing brothers turn up here occasionally (I sometimes see them at my local gym) but basically all these guys who bankrupted the country are giving it a wide berth right now.
However, Hildigunnur is right – apparently the Kaupthing assets will cover all the Edge accounts, and more.
Andrew – I think it is absolutely essential for there to be prosecutions. The people here want justice. As numerous people have mentioned in different interviews, we need it in order for the social contract to hold. If we don’t see justice done, I can definitely see the demos starting up again, yes. – Aside from this, there was a demonstration just last week to put pressure on the government to help people who are drowning in debt. In contrast to the previous government, the leaders of the two coalition parties (Jóhanna and Steingrímur) invited three representatives from the protesters to come inside and talk to them. That defused the situation.
Víkingsson – the problem with defaulting is that the banks are nationalized, owned by us. So it would be kind of like cutting your nose off to spite your face. And criminal investigations are central to getting the money back. That’s why we need to focus on them first.
The rich always get richer, and help from their friends. Look at all the laws broken here by past administrations, and all we ever get is ‘well, what’s past is done, let’s look forward’
Ah the final and most clever deed was to nationalize the banks leaving the people in the same situation but protecting the criminals beyond the collapse. Not that there was much choice but it appears that all the money still available was divided up between those that had control just before nationalization. Either they knew it was coming down (D’uh!) or the feds knew it and were in on the deal (D’uh again).
I can understand the social contract but focusing on who did what and where are they now will drag on for many years and will eat up the money in a final twist of irony. I’d say grab the money 1st. Like they do in Texas, shoot first and ask questions later. Not my style but every day lost is another billion lost forever. It isn’t like we don’t know who the primary players are. They will use the dirty money to defend themselves and the few that are convicted will be bankrupt since they moved the money to the lawyer friends.
But you are not alone. I wish I was there to share in the misery.
Well, in a civilized country I guess you don’t just shoot and ask questions later – just as you don’t grab the money 1st. People are presumed innocent until proven guilty. For better or for worse.
I understand and agree. However I don’t want to see the country do what I’m doing which is freezing in the dark. I’ve lost respect for our leaders and have little faith and only faint hope in the ones that are here to replace them. They must now re-earn that respect which is only by actions and not by rhetoric.
My kids will have a massive debt to repay and they will still be listening to the justice songs from those that claim to be our moral protectors. Their pockets will be picked just like what happened to mine.
What keeps me going is a line (I think from here) that says to the effect that this is only a crisis of luxury.
Um…. Surely Haarde should have acted swiftly and decisively last year by freezing assets before the banks went down; any assets could have been unfrozen later if they were found innocent. If he suspected some significant assets may take flight and that could harm the country, then surely it was his duty to protect the country by temporarily freezing those assets; inaction would be negligence. But I guess it’s now too late to lock the accounts after most of the krona have bolted…
Currently watching Eurovision semi-finals on BBC3 and the first act to get a compliment from the tough British commentator was Iceland with “She’s a peach”!
Just in case yopu haven’t seen it , here is Michael Hudson’s latest piece:
http://inthesenewtimes.com/2009/05/12/icelanders-need-to-be-told-the-magnitude-of-their-economic-problem/
Lee – yes, I agree, he should have frozen those assets immediately. There are a lot of ‘shoulds’ in connection with the meltdown, unfortunately.
And our Jóhanna found favour with the crusty old Terry Wogan? – well, I’m not surprised. She IS a peach.
No more Eurowogan… We get Paddy O’Connell for semi-finals and Graham Norton for final.