I think it’s safe to say that the collective Icelandic nation pretty much keeled over at the news two days ago that the two Björgólfurs had allegedly requested that Kaupthing bank write off half of a loan used for acquiring a controlling share in Landsbanki in 2003 – an ISK 3 billion debt.
Quick rewind: in the early part of the decade, the Icelandic government, then led by one Davíð Oddsson and his Independence Party, decided to privatize Iceland’s two largest commercial banks, Landsbanki and Búnaðarbanki [now called Kaupthing]. Stipulated in the privatization deal was distributed ownership, so that no one large investor could have too much control. After all, the move was designed to be a step up from the status quo, whereby the state [read: the political sector] had for years had excess power to decide who should receive favour from the banks, and who should not.
Before the privatization was completed, however, there was an uproar in the privatization committee. The head of the committee abruptly resigned, citing that the terms of the privatization had been broken, and that the leaders of the two coalition parties – Davíð Oddsson and Halldór Ásgrímsson of the Progressive Party – were intervening unduly in the privatization procedure. He famously remarked that he had never in his life encountered working practices of the sort that were being employed in the privatization scheme and that he could no longer be a part of it.
A short while later, Landsbanki and Búnaðarbanki were both sold. A controlling share in the former was sold to father-and-son team Björgólfur Guðmundsson and Björgólfur Thor Björgólfsson [and their business partner Magnús Þorsteinsson, who has since buggered off to Russia], who were favoured by the IP. They allegedly made a deal with the IP to install high-ranking IP members as executives [and swiftly appointed the IP’s executive secretary as vice-chairman of the board] and grant favour to IP members and their supporters. Kaupthing [nee Búnaðarbanki] was subsequently sold in large part to brothers Ágúst and Lýður Guðmundsson [they of the ISK 500 billion loan], who were favoured by the Progressive Party.
In a classic case of incestuous nepotism – so prevalent in the Icelandic commercial sector of the past several years – Kaupthing loaned Samson [the holding company owned by the Björgólfurs and MÞ] some ISK 6 billion to acquire the share in Landsbanki.
Of course, as those of us who have been following this sorry story know, Landsbanki was driven into the ground by its owners and management. Today, six years later, we the Icelandic nation preside over the charred ruins of a bank that at over a century old is this country’s longest-running financial institution, and which previously had a spotless reputation and endless goodwill. And as if that were not enough, the debts incurred by this institution – partly acquired on the strength of Landsbanki’s stellar reputation – are too colossal for a normal person to comprehend, are already the cause of massive social dissent, and if all goes as planned, have the potential to turn each and every member of this society into a debt slave for years to come, for something we did nothing to incur. [Yes, I am talking about Icesave.]
And now, Björgólfur Guðmundsson and Björgólfur Thor Björgólfsson [he who was pictured a few weeks ago hob-nobbing on a yacht in Cannes] allegedly want their debt written off. They’ve supposedly “made Kaupthing an offer” to pay off half the ISK 6 billion debt, but would like ISK 3 billion [USD 23 million / EUR 17 million] to be dropped.
Some people just have no shame. NONE.
Predictably, there has been a public ROAR of indignation. Kaupthing saw reason to issue a statement yesterday [breaking the bank secrecy code] saying that no – and repeating NO – decision had yet been made on whether the loan would or would not be written off. [In the initial news item it was reported that the offer by the Björgólfurs was considered “viable” within the bank]. This came in the wake of news that Kaupthing employees – including Kaupthing’s CEO and his wife – had been the target of threats after the news broke.
Even Finance Minister Steingrímur J. Sigfússon was quoted in Fréttablaðið today as saying that, as a regular citizen of this country, he felt that this debt was “the last thing under the sun” that should be written off [but emphasized that, “in his role as minister”, he could not comment on the situation – heheh]. Fréttablaðið also spoke to Gylfi Magnússon, Minister of Banking Affairs, who claimed he “choked” when he read the news, and said that he would – like most Icelanders – find such a write-off “a hard thing to swallow”.
Possibly the understatement of the year. Other experts have warned that, if the loan were written off, it would cause massive civil unrest and people would stop their own loan payments to the banks, en masse. Personally I think it would be the spark that could set off an explosion of anger in this country, similar to the Rodney King ruling that sparked the LA riots back in 1992. In my view, Kaupthing is totally playing with fire.
NOT MUCH NEW ON THE WEATHER FRONT
Still mild, cloudy, relatively calm. Currently 15°C [57F], which come to think of it is pretty nice, particularly if the sun comes out, as it did late yesterday afternoon. Somewhere in the south it looks like it may be trying to do just that. Fingers crossed. Sunrise was at 3.23 am, sunset at 11.40 pm.