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The Central Bank under siege

Earlier this week, our new Prime Minister wrote a polite letter to the three directors of the Central Bank of Iceland and asked them to kindly resign because, you know, THE PARTY IS SO OVER FELLAS. She also kindly asked them to have an answer for her by Thursday. It is now Friday, and they have not deigned to give her – or the Icelandic nation – a proper response.

I have long ceased trying to work out what exactly is going through the minds of those Central Bank directors because when I tried my brain got twisted into so many knots that it felt like a macramé wall hanging. Are they TRYING to become the three most reviled men in this country? Do they WANT to trample their honour into the ground to the point where it will never be resurrected? Are they AWARE of the immense disservice they are doing to their fellow citizens, by preventing the Central Bank from regaining some semblance of credibility in the global financial sector? Or do they simply have the psychological development of a three-year old?

My lack of comprehension notwithstanding, a few days ago I did get a wee glimpse of the psychological milieu that appears to exist at the Central Bank, whilst speaking with someone who has some insider knowledge of what is going on up there, without having a vested interest. According to my source there is a very pronounced siege mentality prevalent in the ebony tower, with the key people there feeling as though they’re being ambushed and need to barricade themselves inside. Indeed, this explanation seemed to jibe well with reports we got earlier this week that the CB’s doors had been locked on Monday after a demonstration had been called outside to demand the resignation of the CB board. In the end, evidently, the protest fizzled when it was revealed that Doddsson was not at the Bank but rather abroad attending to some important business [wonder what that could be]. The doors, however, remained locked.

I am reminded of the video from the protest on New Year’s Eve day, the one with the pugnacious Central Bank economist and his brother [they come in at around 1.40 minutes], who shouted at the protesters that they were kommúnistadrullusokkar [communist scum]. This “communist” tag is fast becoming a dirty insult in some circles, those of right-wingers who see their power slipping away and use it to denote anyone who protests or demonstrates or simply would like to see a change in government and fundamental values.  Indeed, I have it on good authority that the economist in question, Ólafur Klemensson, sports a tattoo of the Sun Cross, which according to Wikipedia “is used by various extreme white nationalist and Neo-Nazi groups to represent the Aryan race.” Delightful.

UPDATE: Apparently two of the Central Bank directors had responded to the PM’s letter by the time the RÚV evening news aired this evening. The third had not responded. No marks for guessing who that was.

There was no confirmed information as to what those responses were, but according to RÚV’s sources one of the three, Eiríkur Guðmundsson, said that he planned to show up for work on Monday, as usual.

It is cold, although that’s all relative I suppose. Still lots of snow on the ground – yes, and ice. Right now it’s a balmy -1°C [30F – it’s been colder recently], the sun came up at 9.52 and went down at 5.33 pm.



Comments on this entry are closed.

  • Schneelocke February 6, 2009, 7:22 pm

    Neonazis and similar groups unfortunately have a history of appropriating and abusing symbols already used elsewhere, so I’m not sure I’d read too much into that guy having a sun cross tattoo.

    (Down here in Germany, at least, this is quite a problem for neopagans and the like, too; even something as innocent as a Thor’s hammer pendant can be interpreted the wrong way.)

    That being said, it’s really quite strange indeed that these folks wouldn’t resign now; surely they must realise that they can’t win and that stepping down gracefully now would not only be best for the nation but also for them (it’s one thing to be remembered as being incompetent or having made the wrong decisions, but quite another to be remembered as a stubborn blockhead who’s lost his/her grip on reality).

    Oh, and “drullusokkar”? Darn it, that actually made me laugh. What a cute insult.

  • colin buchanan February 6, 2009, 7:31 pm

    It sounds like the problem here is that if these gentlemen leave their successors will have access to a whole lot of information which wold be compromising not just to these gentlemen themselves but to a network which presumably would extend beyond Iceland itself. No one had ever counted on any of the dominoes falling, but it has happened and concern will be widespread, as far as the City and Wall Street. These gentlemen will therefore be entrusted with holding the fort until trustworthy successors can be arranged i.e. until the red/green coalition has been nobbled. This is probably what Doddson is up to, arranging for due pressure to be applied. Once the threatened leak has been sealed the three of them can disappear from the scene.
    The view the international financier fraternity will be taking as far as Iceland goes will be “no pasaran!’, thus far and no further.
    As I keep trying to emphasise, this is just the beginning in Iceland. The next phase, perhaps, would be the opening up of all the books of the bank to see exactly who did what. That will be resisted by the brotherhood: by the look of it, it already is being resisted.


  • Chris February 6, 2009, 8:31 pm

    There is only one word for it: Unbelievable. And please: No offense against the three year old kids. They clearly understand, when things go wrong. At least that is what I see with my daughter. These guys are obviously not able to see it.

  • Ljósmynd DE February 6, 2009, 8:33 pm

    In other Banana Republics those rabble-rousers of the CB would muster some special forces for a coup d’état, fortunately this is just Iceland.

    Their behaviour is incredibly disrespectful for the PM and the new government and institutions like the CB itself. Strictly speaking, they don’t seem to give a damn about anything else but themselves and they are holding the whole nation hostage for the sake of their conceitedness.

    It is incredibly ridiculous to tag anybody “communist” in those times, when the most capitalistic of all capitalists resort to nationalizing banks and other companies. There are certainly halfwits around, who see the whole global crisis as a communist conspiracy, but you would rather not see them hold any important office.

    There is a paper available from some CB governor about his view of the banking crisis


    It reads like a lengthy succession of excuses, exempting the CB from any fault; no explanation, why the CB missed to let the banks grow out of proportion; no “sorry”, just a shrug like ‘what could we have done about it?’.

  • Ljósmynd DE February 6, 2009, 8:45 pm

    “…why the CB missed to let the banks grow out of proportion”

    Read: The CB missed to prevent the banks from growing out of proportion

  • snowball February 6, 2009, 9:09 pm

    its not about right or wrong anymore for the remaining cb dudes. it appears as if their job is to protect delicate information. wasn’t david oddson talking about a secret he has…cute! just extrapolate their behaviour and you can guess that issue xyz is probably a bigger pile of pooo than nicelands mega debts or kreppan itself.

  • Ljósmynd DE February 6, 2009, 10:41 pm

    One more thing: Is it time again to get the pots and pans out of the cupboard? If the government can be drummed out of office then this might work for the CB staff as well. There could be some reception committee on monday morning, when this ignorant guy shows up. But it should be wise to watch out for paper containers being removed out of the CB. They might use this weekend for a cleanup of incriminating evidence, if they haven’t done this already.

  • Kelp February 6, 2009, 10:42 pm

    They must not be done shredding all the evidence yet.

  • Mondrian February 6, 2009, 11:00 pm

    “You say yes, I say no… You say stop and I say go, go, go…”

    The CB heads are seemingly determined to leave only on their own terms despite pressure from all sides now. One only wonders now what kind of negotiations might be taking place.

  • Lissa February 6, 2009, 11:09 pm

    The sun cross is a common neo-pagan and Ásatruar symbol. I certainly don’t want to claim Ólafur, but my understanding is that only in Norway is the sun cross used as an overtly racist symbol more often than not.

    The BBC said something about one of the board saying they couldn’t respond yet because David was still overseas. I thought two was a quorum? Are the two non-Davids that spineless?

  • James February 6, 2009, 11:18 pm

    If you’ve ever seen the ending of The Wicker Man, then you’ll know how it will all end for Oddsson…


  • alda February 6, 2009, 11:25 pm

    Thanks everyone, for the input!

    Lissa – DO came back last night and it appears the others needed to consult with him before they could make their decisions. Like I said, I’ve given up trying to analyze what could possibly be going through their minds. It’s too far beyond me, really.

    James – let us hope it does not come to that!!

  • David February 6, 2009, 11:49 pm

    In the short run, while they may not be able to remove or fire the three directors of the Central Bank , could they take away all direct reports to the three specifically, so that the three directors have no one at all to work for or with them? Could they cut expense accounts, telephone and fax lines, office lights, heat to their offices, drivers, cars, and security to these specific three? If Iceland is following the IMF program anyway, these three really don’t have any decisions to make that can’t wait. In the longer run, parliament can change the law and remove them.

  • Gregg Thomas Batson February 6, 2009, 11:54 pm


    After reading about the Central Bank economist and his brother shouting at the protesters that they were “communists” I was reminded of the quote by H.L. Mencken that has always made me sympathetic to the efforts of all protesters against arrogant governments and their supporters.

    “The notion that a radical is one who hates his country is naive and usually idiotic. He is, more likely, one who likes his country more than the rest of us, and is thus more disturbed than the rest of us when he sees it debauched. He is not a bad citizen turning to crime; he is a good citizen driven to despair.”

  • wally February 6, 2009, 11:55 pm

    I heard a story today from an inside connection at the CB that pretty much echoed Colin’s post from earlier.
    Its kind of a weird one because you tend to immediately discount it as a conspiracy theory but as time goes on you begin to realise that it is very possible and being what human nature can be entirely likely, in fact almost definately so.
    You hope the world isnt that corrupt but if you really think about it, you know it is. I think I and alot of other people are in denial about how bad the world’s financial slavery situation actually is or maybe is.
    What Colin says really should not be discounted just out of hand is the point I would like to make. To discount it as crazy was definately my first instinct when I heard it and it has been quite scary for me to actually confront the possibility that it might be true. It kind of leaves you feeling bleak.

    Just a thought..

    Another one is had was looking at Davið ´s history. He has never been in opposition. Right from when he was elected as a student in Mentaskoli, Until now, he has never lost. The man is almost 60 and hasnt learnt to deal with failure like most human beings. It must be quite scary.
    This is another reason maybe why he wont leave. I tend to think it might be Colins reasoning but I hope for the worlds sake that Davið is just a scared old man.

  • Angeliki February 7, 2009, 12:23 am

    Hi there,

    It could be MUCH worse. Early December 2008 protestors in our banana republic (member of the EU / Eurozone… lol!) took over Athens (and many major Greek cities) for about a week or so, destroyed and looted as much as they could, threw thousands of molotov bombs against the cops, however the government’s still in place, nothing has changed, everything’s exactly the same as before… There is a continued upheaval ever since but unfortunately the government is still in place.

    Not that before December 2008 Athens was a peaceful, lovely place to live (the opposite I’d say). But all the anger and the destruction and a capital under siege for 10 days led to absolutely nothing… And mark my words, the Greeks will vote for the same inept government in the next elections…

    I do believe the peaceful demonstrations (which in your case seem to bring results -your people are smarter than us for sure!) will eventually overthrow the CB scums.

  • GB February 7, 2009, 12:47 am

    Neither Iceland’s banks nor its central bank caused the City or Wall Street to collapse. In fact, it is the opposite. Iceland’s banks are a mouse that was stepped on by the elephant. That the elephant stumbled after, and is falling, is not the now flat mouse’ s doing.

    The Icelandic central bank has been under siege, by those outside Iceland, who contributed to its, and other banks’ collapses, and by Icelanders who have decided to villify the Central Bank as the cause of the Icelandic banks’ and their own banking troubles. The villification is not helpful to anyone, and is likely to lead to worse for Icelanders in general.

    The Icelandic central bank’s real problem has been that it has not communicated to the Icelandic people. It apparently did not want to report forst that it did not know what was going on (as few did), and then, with the rest of the financial world, it has not wanted to say what did go on, apparently for not wanting to offend who it sees it will have to work with in future, who is/are responsible.

  • Flygill February 7, 2009, 12:48 am

    “The next phase, perhaps, would be the opening up of all the books of the bank to see exactly who did what.”
    Apparently that has already begun. The results so far are not pretty.
    – Kaupthing has 1800 billion ISK debts over assets.
    – Glitnir has 1400 billion ISK debts over assets (not sure about that).
    – Baugur has 1 billion pounds debts over assets. This is supposedly the “assets” that Iceland would use to pay back the British for Icesave.
    – 1000-1500 billion ISK were stolen by bank insiders and hidden in offshore accounts, according to a left-green parliament leader.
    – Robert Tschenguiz was “lent” 107 billion ISK by Kaupthing. He is broke and cannot pay.
    – Hafskip and other big companies, who owe a lot of money to the banks, lost huge amounts last quarter and are probably broke.

    One of the CB members wrote up a report of the bank crisis, in which he claimed that the CB was constantly monitoring the activities of the three banks. This is probably true, they did watch the banks all the time. But even if the CB completely screwed up, as they seemed to have done, and the information comes out – what good is that going to do anyone here? It’s those huge, enormous, mind-boggling bank debts that are the big issue. I’m not sure of the conversion rate, but it looks like 20-25 billion euros that Iceland is supposed to pay. Just for the banks. Not including Icesave. Not including IMF loans. Not including government bonds. The amounts aren’t speculative anymore, they’re real.
    You could appoint Jesus Christ, Warren Buffett, and Bill Gates to be the CB directors, and that wouldn’t save Iceland.

  • maja February 7, 2009, 4:37 am

    Well, regardless of circumstances, there cannot possibly be a need for three directors of the icelandic central bank. Honest communication is what is required right now and those guys aren’t giving it, so they should go.

  • Rachel Down Under February 7, 2009, 6:07 am

    Now they are all together in Iceland why doesn’t the Government cancel or seize their passports? It would be reasonable to do so on the grounds that they have severely damaged Iceland and its reputation and have much to answer for before thy can be allowed to leave.

  • Andrew February 7, 2009, 6:32 am

    Does anyone suspect that they’re only hanging on until all the incriminating evidence has been destroyed?

    You should plan for a total blockade of the Central Bank building – nobody goes in and nobody goes out, and cut off the electricity and telephones!

  • Dave Hambidge February 7, 2009, 9:48 am

    Just stumbled on this article;


    in todays UK Telegraph newspaper.

    Is it true, the public attitude?


  • Frank Lynch February 7, 2009, 11:04 am

    Wouldn’t it be an idea for your Prime Minister to order the arrest of the 3 Central Bankers in question? She has tried the softly-softly approach and they have laughed in her face. Time to get as tough as the citizens who stood outside and brought down the government.

    Frank Lynch.

  • James February 7, 2009, 12:21 pm

    You could appoint Jesus Christ, Warren Buffett, and Bill Gates to be the CB directors, and that wouldn’t save Iceland.

    Okay, if anyone knows God’s email address, maybe they should forward him an application for that new CB governor position. Having created the universe in 6 days, he has a demonstrable record of successfully delivering large change programmes. And, although he may not meet some of the job spec criteria (eg the Old Testament doesn’t mention a masters in economics from a major university), he is nonetheless omniscient and omnipotent.

  • alda February 7, 2009, 2:09 pm

    Thanks for the input, everyone. Very interesting to read your comments.

    As for the forced removal of the CB directors, the next step (since they will not go willingly) is to change legislation so that they can be fired. (The more ‘radical’ suggestions presented here I fear are not acceptable in a democratic state, alas.) That can take days or even weeks – it will have to be debated in parliament and it is safe to assume that the Independence Party will haggle ad nauseum in order to delay the process.

    This morning, though, it was announced that one of the directors, Ingimundur Friðriksson, will step down.

    Angeliki – my heartfelt sympathies … I had no idea that your protests had delivered no results. We just got reports of the protests up here, and then the reporting died out. That’s terrible.

    Andrew – yes that theory is discussed upthread.

    Dave – Thanks for the link … not sure which public attitude you’re referring to. Can you be more specific?

    I have stopped reading most of the articles published about Iceland in the foreign press – partly because there are just so many of them and I don’t have time, partly because they always, without fail, misrepresent some aspect of what is happening here. This one is no exception – no significant errors, but my sense is that the writer is both chauvenistic and sensationalistic. To wit:

    no one cares that she is a lesbian, having swapped the father of her children for her current partner.

    Actually Jóhanna Sigurðardóttir was single for many years before meeting her current partner, by which time her sons were both adults.

    He acquired a yacht, a house with a bullet-proof panic room and a beautiful wife, Ingibjörg Pálmadóttir. Her customised Mercedes is known in Reykjavik as the “white pearl”.

    Makes it sound like Ingibjörg Pálmadóttir is some kind of trophy wife as opposed to one of the wealthiest women in Iceland before she got together with Jón Ásgeir.

    Small misrepresentations, perhaps, but annoying nonetheless. It’s part of what we are seeing so frequently of late – people who don’t have insider knowledge of what is happening in Iceland pretending to have it – and exposing their ignorance in the process.

  • Andrew February 7, 2009, 3:31 pm

    Was there a demonstration today?

  • Dave Hambidge February 7, 2009, 3:41 pm

    Alda. I meant the taxi driver as mentioned as start.

    Other than that, your critique of the article is what I thought might be so, a brief visitor making basic errors and huge judgements, and fascinated by prurient sex, as the brtis tend to be!


  • colin buchanan February 7, 2009, 5:27 pm

    The Telegraph piece is particularly amusing- a classic bit of psychological projection with the Brits calling Iceland a “foolish little nation”, a “failed state”, a third world country. As we say: “the pot calling the kettle black”. Even in the comments below the article people thought it was about Britain. It will be interesting to see how
    New Labour and their media cronies spin the looming implosion of Britain which will be one of the most dramatic events the world has ever seen. In Glasgow the council is obviously bankrupt but is just to shy to say; they are closing about a dozen schools and soon it will be the payroll. Any prospects for music teachers in Iceland?


  • Flygill February 7, 2009, 6:23 pm

    Here’s an interesting factoid. On Wenesday a fish producing company in Hafnafjordur advertised in Frettabladid that they needed process workers. Less than 20 people applied for the jobs. Only 2 of the applicants were Icelandic.
    The official number of unemployed is 12,980. Right now they think it is “beneath” them to chop up fish.

  • Paddy February 7, 2009, 8:40 pm

    [communist scum] …. The pot callin’ the kettle black, in a manner of speaking.
    What do you call privatizing profit, and nationalizing loss.

    I think we’ve lost sight of just how powerful these Central Bank figures are, and how they’ve become, a law unto themselves; without – regulation – law in fact.
    Banks with the blessing of government have followed ((((since 1999 Clinton repealed the Glass-Steagall Act, which ensured a complete separation between commercial banks, which accept deposits, and investment banks, which invest and take risks.)))) America’s lead and together with business exclusively ruled the roost/world.
    As long as government got there cut, and the figures looked good on paper that was all that mattered. No one checked the all too complicated packages which was a giant pyramid scheme.

    Harry Markopolos, an independent financial fraud who repeatedly warned (years ago) the Securities and Exchange Commission that Bernard Madoff was perpetrating a massive investment fraud said that the regulatory agency that oversees financial markets is inept, “financially illiterate.”
    He said: “The SEC is also captive to the industry it regulates and it is afraid of bringing big cases against the largest most powerful firms.
    Cleary the SEC was afraid of Mr. Madoff.”

    Do you find it truly amazing Madoff is still under house arrest still. I don’t He knows they all knew the world finance eight/ten years ago was in a precarious position, but no one dared stop it because they knew what is evident right now, the financial model that the world is run on does not work and not one has a clue how to replace it.

    The world has gone off the financial track, derailed and that’s a fact also no one will admit.
    All the stimulus packages in the world don’t mean a thing. You simply can’t make work again what does not work. Can you dig it.

  • Ljósmynd DE February 7, 2009, 8:49 pm

    I have read, there was a hassle in parliament about the new central bank bill, the opposition questioning the professional making of this law (as far as I have understood, professionalism wasn’t the prime issue of the last government, but views seem to change). And of course the IP sees the independence of the central bank being threatened, a line of argument which will certainly be repeated more than enough in the next weeks.

    I am more than surprised that the government or the majority in parliament doesn’t have the power to sack the CB board on the spot. But this ‘independence’ principle – in other countries used with regard to monetary policy – seems to be misused in Iceland, defining the CB as some kind of shadow government – the head office for nepotism and cronyism of Iceland.

    If the process for passing the bill is delayed and the Dark Lord, supported by his Death Eaters, stays put for the next weeks, then at least every Icelander with a sound mind will be reminded, day after day until the elections, for what purpose he/she is casting his/her vote.

  • Gunnar Gunnarsson February 7, 2009, 11:42 pm

    I can actually confirm that Ólafur is indeed a big fan of the nazis. I worked in the security department of the central bank few years ago and had to go into his office on more than one occasion. In his office you can find a small portrait of Adolf Hitler and a Swastika flag. This is not a joke.

  • GB February 8, 2009, 12:04 am

    For an approximately equally accurate, but more complimentary, Telegraph take on the new PM, see:

  • A New Ireland February 8, 2009, 1:02 am

    Ireland is closely following Iceland in terms of despair with Government. I just watched the BBC news report about this site and I think Irish bloggers are going to get it going here too. We have had corrupt politics for far too long. Any help and advice on how to spread the message is greatly appreciated.

  • Deirdre February 8, 2009, 1:46 am

    For an interesting take on the astrological significance of this particular moment in terms of what’s going on there, check out this link: https://www.mooncircles.com/fullmoon_julia.html

  • DJ February 8, 2009, 4:11 am

    Obviously the other two also need to go.
    However the PM hasn’t offered anyone up to replace them so what is the point of them going at the moment?Iceland is in crisis and to have nobody at the helm of the CB would be even more disastrous.
    I believe that the remaining two are trying to hang on until the next election and are probably hoping they will be able to keep their jobs if the IP party is successful in these elections.
    I might be in a minority but I think it is absolutely ludicrous that any temporary government is trying to implement such radical changes-EVEN though they are needed.
    Unfortunately Johanna isn’t doing herself any favours at the moment-she is showing a complete lack of leadership and even though the public wants a change they surely won’t vote for someone whose only real statement is “the Icelandic people need to stick together during these tough times!”
    There is still time for her to turn things around,and I hope she is able to,but the current events are playing right into the hands of the LGs who might well get a free pass into government.
    This really would be a “out of the frying pan and into the fire” type of scenario.

  • alda February 8, 2009, 12:32 pm

    DJ – the position will be advertised, and a minimum of a Master’s Degree in economics will be required. As for this: whose only real statement is “the Icelandic people need to stick together during these tough times!” – clearly you have not been paying attention. That was the previous government’s line.

  • DJ February 8, 2009, 2:10 pm

    Johanna made that comment earlier this week.
    I understand your desire for change and the need to support anything that will oust DO and his cronies but you cannot deny what Johanna has said.
    Are you impressed with her leadership then?

  • alda February 8, 2009, 3:45 pm

    DJ – I’m not denying that Jóhanna spoke those words, what I’m saying is that the IP Party said it too. They all say it. It’s become a cliche. But the IP repeated it to the point where it was almost like one of their policies.

    As for Jóhanna’s leadership, too soon to tell. She’s been in office for a week. But she’s going at it with a gusto, which is a big improvement over the last government, as far as I can see. And she’s keeping the public informed. Also a big improvement.

    She’s got 80 days. At the end of that period, the people will make up their minds about her leadership.

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