Suckers going down in Iceland

October 3, 2008 3:48 PM

While the Wall Street financial crisis gripped the world Icelanders woke up one day to find that the Icelandic state had forcibly taken over the country's 3rd biggest bank, Glitnir. The worry is now that one of the two larger banks could also fail and the state wouldn't have the resources to do anything as the two remaining of the big 3 have assets totaling 10 times the GDP of Iceland. While the Central Bank claims it was the only option in a bad situation, prior bad blood between one of the Central Bank's directors, a former Prime Minister, and the main owner of Glitnir have some wondering if Icelanders have just been witness to "the biggest bank robbery in Icelandic history." [Warning: The story you are about to read may make you reconsider the verisimilitude of soap operas]
posted by Kattullus (25 comments total)

Personally I have a hard time deciding who I like less, insanely wealthy plutocrats or aging right-wing politicians.
posted by Kattullus at 3:49 PM on October 3, 2008 [1 favorite]

All I know is that I love bread and circuses.
posted by GuyZero at 3:53 PM on October 3, 2008 [3 favorites]

I'm no financial expert, but I had an inkling that in the last years, there was something decidedly fishy about Iceland's banks.
posted by Skeptic at 3:59 PM on October 3, 2008

I'm no financial expert, but I had an inkling that in the last years, there was something decidedly fishy about Iceland's banks.

No, it pretty much smells like that everywhere.
posted by spiderwire at 4:05 PM on October 3, 2008 [5 favorites]

I harbour no illusions that Baugur and co. are blithe angels – their ‘Robin Hood’ aura has pretty much worn off and for all I know they may very well be guilty of criminal misconduct. What’s scary, though, is if powerful individuals in this very small community are able to manipulate those institutions that are supposed to be protecting freedom and democracy and all the rest to meet their own agenda… Oy Vey!

Must be nice to live in a country where you can say that with a straight face.
posted by spiderwire at 4:09 PM on October 3, 2008 [1 favorite]

well, i tried to read the last link, "the biggest bank robbery in icelandic history," but god was that some kind of longplayer...

but she seemed literate so i dug around until i found this: "if it makes you want to puke is it art?" which was a lot more interesting (to me). and it even covers some of the same themes: bad smells; expensive shit; long convoluted histories of vainglorious and pernicious individuals.

is it still friday? i'm just flashed.

p.s. all this bank-y crap in my stupid country is making me happier and happier when banks fail. and when bankers get shafted it only makes me chortle. chortling my lunch up on my world clock.
posted by artof.mulata at 4:13 PM on October 3, 2008 [1 favorite]

From what I've read Iceland's economy has been in a rough patch for awhile, particularly the significant inflation. It's hard to stabilize an independent economy when you only have 300,000 people.
posted by Nelson at 4:14 PM on October 3, 2008

Was this the bank offering 15% interest rates to Britons?
posted by delmoi at 4:53 PM on October 3, 2008

I mean, I like my Icelandic cousins and all, but the Icelandic financial sector truly deserves everything it has coming.

The Scandinavian countries are working their asses of trying to save Iceland from total collapse. Go back about five years and check out how Iceland was so proud of itself for becoming the world's richest nation. (Somehow they thought they deserved it, and that it could last. Yeah, right.)

Then again: Glitnir is the third biggest bank in a Mickey Mouse country. I wouldn't freak out too much.
posted by Dumsnill at 5:27 PM on October 3, 2008

whoa, This news about Iceland's bank is a surprise. Looking it up further on the web I see that it impacts Britain as well, "Some of the biggest names on the British high street could be hit by the nationalisation of Iceland's third biggest bank."

"The bank has helped to bankroll some of Britain's best-known entrepreneurs including Robert Tchenguiz, the holder of sizeable stakes in supermarket group J Sainsbury, pub chain Mitchells & Butlers, restaurateur Gordon Ramsay, as well as being one of the biggest investors in Baugur, the firm that owns stakes in high street retailers such as Hamleys, House of Fraser, Oasis and Debenhams. "

"Yet the shockwaves caused by the bankruptcy of the Wall Street investment bank was this week responsible for toppling financial institutions in Iceland, Belgium, Britain and Germany; causing investors and customers to question the stability of even the soundest lender; and forcing European governments to take unprecedented steps to shore up confidence in their banks."

It's being talked about as a contagion. I don't understand that and wish I did.

So interesting how the economy has become interconnected globally.
posted by nickyskye at 5:50 PM on October 3, 2008

@Dumsnill:
Not everyone over here is stupid and greedy. Some parts of the Icelandic banking system are pretty clever. The IT departments are rather strong, for instance - that's how some of the Icelandic profits were made. Develop effective, cheap banking software infrastructure in tiny, tech-savvy and well educated 300.000 person "bubble". Buy small, average-running banks in neighboring countries, economise by renovating the software infrastructure, and profit.

Of course, others just rode the exchange rate wave. The krona's value got artificially inflated, and people took dollar loans to buy retail chains and Land Rovers.

Overview:
There was some morally debatable privatization in Iceland during the last 10-20 years, so some money was lying around. Some people have been clever with that money and invested it carefully and properly. Others were a bit too greedy, and are getting currently severely fucked by capital shortages combined with difficult exchange rate fluctuations. The clever people, though having made smaller absolute amounts in the preceding boom years, will now be richer than the high rollers, and eat them.
posted by krilli at 6:10 PM on October 3, 2008 [1 favorite]

No, of course not, krilli. And you make some good points. (Actually, Iceland is one of my favorite countries on Earth.)

But: Icelandic banks have behaved in a radically irresponsible way for years now. And Swedish, Norwegian and Danish taxpayers are being forced to pump billions into Iceland's financial sector, even though we had nothing whatsoever to do with this greedy stupidity.)
posted by Dumsnill at 6:22 PM on October 3, 2008

So these guys in the Central Bank? Do they work for the Yakuza? Because I understand they have a very similar approach to mergers and acquisitions?

Also, I'm not quite getting why the other Scandinavian taxpayers feel obliged to bail out Iceland, Dumsnill. Can you say a little more about what's going on there? It only seems like a few months ago that all the financial papers were touting the Icelandic financial services sector as a phenomenally good investment.
posted by PeterMcDermott at 6:55 PM on October 3, 2008

Here's one:

Dette er en vennetjeneste. (Because we're friends.)

The article is in Norwegian, but a google translate will give you the gist of it.
posted by Dumsnill at 7:05 PM on October 3, 2008

NewYorkerFilter:

Iceland's Deep Freeze
posted by KokuRyu at 9:42 PM on October 3, 2008

Favourited for use of 'verimisilitude.' Goes without saying that a Kattullus post is excellent.
posted by dirtynumbangelboy at 10:52 PM on October 3, 2008

Favourited for use of 'verimisilitude.'

Damned Icelanders. If they weren't spending so much of their GDP on useless things like fancy education for all, they wouldn't be in this mess.

Let them eat slartur!

(I have to say, during my recent visit I was struck by the phenomenal number of new or nearly new 4x4 SUV's in the place. And found myself wondering just how essential they were -- it seemed as though almost every family had one, even in the towns. And I was reminded that in places here where they *are* genuinely necessary, like on remote farms, with people who use them for work, etc. people are more likely to be driving 40 year old Land Rovers than brand new BMW, Audi and Mercedes SUV's.)
posted by PeterMcDermott at 4:21 AM on October 4, 2008

No link to Mutant's comment from May?

"... we've been worried about Iceland for a while ..."
posted by Ritchie at 4:58 AM on October 4, 2008

There was some morally debatable privatization in Iceland during the last 10-20 years, so some money was lying around. Some people have been clever with that money and invested it carefully and properly. Others were a bit too greedy, and are getting currently severely fucked by capital shortages combined with difficult exchange rate fluctuations.

In fairness, it's not like the economic boogieman snuck up on the financially irresponsible and *smack!* hit them with a recession. Standard & Poor's was saying as late as 2006 that the economy was "overheating", and that the government needed to step in immediately. But the conservative goverment - with the current Central Bank chairman at its helm - just stood back, crossed their arms in front of their chests, and told the country that everything would work out. But now that the economic crash is obvious, these same conservatives claim it's the fault of the American financial crisis.
posted by Marisa Stole the Precious Thing at 6:41 AM on October 4, 2008

@Dumsnill: I think we're on the same page. I don't have much to add right now, but I just want to say this quite clearly: We do have a significant population of greedies and stupids. Just not everyone.
posted by krilli at 7:07 AM on October 4, 2008

@Marisa:
Hey, they just went bankrupt, don't go and rob them of status as victims and survivors.

Joke.

Yep, that's IMO the exact point where certain negative personality traits come into play - greedy doesn't see the angry glow of the overheating economy, stupid don't listen to them that tells of it.
posted by krilli at 7:10 AM on October 4, 2008 [1 favorite]

Hey, they just went bankrupt, don't go and rob them of status as victims and survivors.

As per usual, the greed of a few and the false reassurrances of their frontmen runs everyone into the ground, and its the real victims who end up footing the bill.

Wow, it's a small world after all!
posted by Marisa Stole the Precious Thing at 7:28 AM on October 4, 2008

LOL - silly Vikings. I shorted Bjørk months ago.
posted by kcds at 5:43 PM on October 4, 2008

The party's over for Iceland, the island that tried to buy the world, article in The Observer/Guardian. Icelandic bank with British savers' money enters crisis talks, from The Sunday Telegraph.
posted by Kattullus at 9:20 AM on October 5, 2008

Iceland adopts sweeping bank powers to stem crisis - Reuters.

Threatened with national bankruptcy, Iceland agreed to adopt sweeping powers over banks on Monday as its financial system tottered, its currency plunged 30 percent and a leading agency cut its credit ratings.

The ruling alliance and opposition parties united on a bill that gave the state the ability to intervene at will in the country's battered banks. Parliament passed the bill and its provisions took effect immediately.

"We were faced with the real possibility that the national economy would be sucked into the global banking swell and end in national bankruptcy," said Prime Minister Geir Haarde.

Things are... not going swell.
posted by Kattullus at 6:30 PM on October 6, 2008