Icelandic Bank Bailout

[manuel]

ok so everybody here must know about all these banks collapsing - most recently an Icelandic bank went down with about 5billion quids worth of british savers money in ....

The british government has stepped in and said it will pay back all private british investment in the bank.

Is this right ?

Personally I think its an outrageous decision - me and everyone else are now going to be paying for essentially other peoples gambling losses. they all knew the risks of investing in a foreign bank with a high interest rate so why bail them out ?

has the world gone mad ? If anyone should give compensation surely its the Icelandic government ? And does this encourage people to invest in super high risk banks, safe in the knowledge that me and you will be here to pick up the pieces ... ?

what do you all think ?

[Tony Harrison]

If the UK gov didn't do this, there could be dire consequences, like mass runs on the banks, which, perhaps ironically, would worsen the situation. I mean, look at Northern Rock - just a hint of a closure and the idiots were queueing for days. In fact, they were even queueing after the Bank of England guaranteed their savings.

[manuel]

If the UK gov didn't do this, there could be dire consequences, like mass runs on the banks, which, perhaps ironically, would worsen the situation. I mean, look at Northern Rock - just a hint of a closure and the idiots were queueing for days. In fact, they were even queueing after the Bank of England guaranteed their savings.

surely the mass run would be from abroad to people bringing their money back in ?

I understand why the government stepped in when northern rock, BB and in a way HBOS went down the pan - as they are british banks. But why should they step in when its a foriegn bank with people just after a better rate than british banks that have more security ?

[1a2bcio8]

surely the mass run would be from abroad to people bringing their money back in ?

I understand why the government stepped in when northern rock, BB and in a way HBOS went down the pan - as they are british banks. But why should they step in when its a foriegn bank with people just after a better rate than british banks that have more security ?

The bailout is essentially a loan though, if I'm correct? In which case, in terms of trying to maintain some sort of economic stability, I'm not so concerned about my tax money being used in that way, even if it relates to the banks having made some very bad decisions

I'm fairly ignorant to this situation though so my judgement isn't really founded on much.

[Hobnobs]

I would imagine all the people that invested in this bank have a fair amount of dollar, which in turn would make them quite influential. At a guess, perhaps the government fancy getting in their good books to try and drum up some support for poor old gordon.

[manuel]

The bailout is essentially a loan though, if I'm correct? In which case, in terms of trying to maintain some sort of economic stability, I'm not so concerned about my tax money being used in that way, even if it relates to the banks having made some very bad decisions

I'm fairly ignorant to this situation though so my judgement isn't really founded on much.

No loan - the british government are giving money to people who have just been unlucky with their money (people who understood the risk) ... If I bet on the favourite at the grand national should I be given my money back if it doesnt win ?

[1a2bcio8]

No loan - the british government are giving money to people who have just been unlucky with their money (people who understood the risk) ... If I bet on the favourite at the grand national should I be given my money back if it doesnt win ?

Well, that certainly makes me feel differently about the situation. What do we risk by not giving the loan?

Also, are the people whose savings that would be restored, generally going to be individuals with high incomes anyway?

[manuel]

Well, that certainly makes me feel differently about the situation. What do we risk by not giving the loan?

Also, are the people whose savings that would be restored, generally going to be individuals with high incomes anyway?

I really dont know - maybe labour lose support ?

My sister has savings in that bank - not much - but some - and she is a teacher ? She was just after a great rate. True the bank up until a few days ago had a good credit rating but still, there is a risk and you are informed of it when you open an account ?

apparently a load of councils had money in it - which does make sense that the government bails out (although amusingly it looks like they wont !!)

[Simpson]

The problem occours because if one bank fails it causes a domino effect.

- Reasons against the governments supporting the banks

* were supposed to live in a free market economy, where all decisions are decided by supply and demand and not interfered with by the government, this is the foundation of how our economy works and is what makes us not fashist and controled by the government

* its the banks fault(ish) they have been greedy and over invested in projects which have failed, they have over streached themselves during the economic boom and paying the price when no-ones given return. they have over lent money and so haven't forecasted accuratly and havent put money away for bad times

* Tax payers are going to pay the price undoubtedly a f**king lump of money, which is already too high because of other things (i.e. the media blaming immigration as they always try to dragg up)

These are the points that are worrying on the news so why would we do it?

* One of main factors in the bail out is protecting savers. i.e. people who haven't been greedy and have put money aside, your "on screen ballence" is just number in a computer - if people think, 'f**k this i want my money now' the banks are screwed, by law they only have to keep a reserve of about 1.5% the total ballence in your account, so if people all suddenly want to withdraw it its just not there, its most likley invested in long term projects which will take time to get back.

* There has been massive inflation in goods, this is because - low interest rates makes people feel "richer" less out of there pocket each month to pay variable rate morgages so they buy more = this causes inflation becuase people are just throwing money arround, companys make more money and expand and the econonmy grows (which helps the government to reach quotas on employment and earnings) however inflation has gone over 10% where the governments target is 2% so its out of control, so by the government interveing it protects inflation to a certain extent.

* it there is no trust in the economy nobody invests or gives out money and banks stop trade between each other, this means the banks continue to make no money, so if one bank fails the rest are likley to fail also it would cause economic disaster aka all your savings and morgages and anything money related collapses, money becombes worth no money blah blah blah. but if people have more faith and protection then they will start trading with more confidence, stock prices will increase and it will all be dandy/

personally i don't think its a perfect sollution, i belive in a free market economy but then again i do belive that they are trying to protect the country. i think the governemt and bank need to understand the business that we inevitably will go through ressessions and they should be putting money aside to protect consumers.

i don't know about all this icelandic bullshit, just sounds stupid to me, councils using offshore accounts/

f**k me that was a hell of a lot of bollocks

Edited October 9, 2008 by Simps

[Papa Manual]

There’s a branch of Landsbanki in Guernsey called Landsbanki (Guernsey) Limited. They went into administration two days ago and no one can touch their money either. The problem in Guernsey is that the local government does not have any measures in place to protect savers deposits. I work with two people who have a combined amount of £25,000 in Landsbanki (Guernsey) Limited and they’re not expecting to see a penny.

As a supposed world leader in financial services this presents a major issue when it comes to the local economy (as well as money held here by international entities). If you think about it, international companies run a lot of money through Guernsey (for tax purposes) and with them worrying about whether their money is safe they will start looking at safer places to put it. Even Jersey guarantees a certain amount of money deposited in bank accounts. All it will take to topple Guernsey’s entire economy will be one business losing their funds and kicking up a stink.

Despite this, I do not see deposit guarantees as a viable option in the current economic situation. Because of this supposed “credit crisis” governments would have to have hundreds of millions of pounds just sitting around in the eventuality of a major banks collapse. This cash couldn’t be invested for obvious reasons. When everything is plain sailing citizens would moan that all this dough is sat doing nothing when there’s so many good causes etc.

Iceland guarantees up to about £16,500 of peoples deposits. If you look at the Icelandic economy, their debt outweighs their gross domestic product by 12 times. The country is on the verge of bankruptcy. They’ve just borrowed about three billion quid (off the top of my head, not sure if that exact amount is correct) off the Russian government. This doesn’t even cover the amount they owe to Britain. If they honoured their guarantee to Britain their economy would be even more dire shit. On the ‘flip-side’ this has happened to many countries before. In the mid-1990’s Brazil went tits-up and most of their debts were just written off. If you look at their country now you wouldn’t even think they’d had an economic crisis less than a decade ago as there’s so much development and progress there.

A small number of people have been harping on for years that this would happen and no one listened because they knew how much money they could make out of what is basically Americas false economy. GREED! It’s a catch-22 situation that cannot be resolved without heavy casualties because rightly there is no confidence in the world’s financial systems. If you construct a building that gets exponentially bigger and wider (ie gains mass) as it gets taller it will eventually fall in on its modest foundations, landing on everyone underneath.

EDIT: And just to add, thanks USA for dragging the rest of the world into the shite as per usual. Governments like those in Britain/Europe etc should know better, but there's people who are going to suffer far worse.

Oh yeah, and about the Icelandic banks interest rates; you have to get a little suspitious when a bank is offering interest that's two percent higher than base-rate. They're just trying to attract business to drag themselves out of the shit (unsuccessfully I may add).

[Extreme_biker0]

The govornment are not re-imbursing the savers, the FSA are. The banks trading under the FSA (including icesave) all paid into this fund managed by the FSA to ensure savers were compensated. It's not your tax money. Becasue Icesave paid in, they are covered, rightly.

There's £3.04bn in the fund at the minute.

The FSA basically just tried it on; getting iceland to pay when they really weren't obligated to.

I'm not sticking up for Iceland as they are guilty of malpractice, IMHO, but those are the facts.

The great majority on here have nothing to worry about. Either:

- the asset bubble (houses) will be allowed to pop, taking banks out as it goes, and making houses cheaper for everyone,

OR (and this is what's happening)

- world govornments will prop up the asset bubble by pumping enough cash into banks to keep them afloat. This inflates the currencies massively, making peoples savings worthless, so essentially it's the rich people (holding cash) that pay.

It's money spent by the govornment causeing peoples savings to devalue through inflation.

Inflation - the stealthiest tax ever (but only on the rich).

Edited October 10, 2008 by Extreme_biker0

[1a2bcio8]

On a somewhat related note, I just received an e-mail pointing to this petition. Despite being fairly ignorant to what's going on, this seems to make sense to me. I signed the petition anyway.

BUY-IN NOT BAILOUT

Edited October 10, 2008 by Ben Rowlands

[Mark W]

What happens when they get to 150,000, or why is it 150,000 in particular they want to get to?

[1a2bcio8]

What happens when they get to 150,000, or why is it 150,000 in particular they want to get to?

Perhaps that quantity requires a mandatory consideration by politicians? Or perhaps, more simply, that quantity is just generally considered enough to get (or justify) the relevant persons attention?

I can only guess!

[Mark W]

I was hoping for some kind of fireworks display, or at least confetti dropping from the ceiling in the style of a Blue Peter fundraising thing.

C'est la vie.

[thefletch]

Most of the stuff said in here is correct, and clearly people who actually have an idea of how the economy works have contributed, most of what I was going to say has been said.

However, people saying that the people who have put their money into icelandic banks were taking a risk and therefore don't deserve to have their money reimbursed?! what the hell are you on about?! The whole reason people put money into banks is because they want no-risk growth. In general, when markets are everything except as shocking as they are now, investing in the FTSE100 will always realise more gain than slapping your money in a bank at 6% interest. Some people though, mainly those facing retirement within the next 5 years, want nothing more than to know their money is safe, they could not afford to retire without their savings intact. There was a women on the news yesterday who had £100,000 in Icesave, her words: "I didn't want to risk investing my money in the FTSE100, I wanted my money to be safe so I just put it in a bank account" - which was absolutely the right thing to do. I don't quite understand where this whole "icelandic banks are dodgey they should have known that" or "if they're offering silly rates they must be in trouble"...for starters less than 6 months ago nobody was even talking about which banks were dodgey and which weren't, let alone thinking about which were protected. Secondly these icelandic bank's products aren't even the most competitive products on the market anyway!! the only market leader is Kaupthings regular saver. So for god sake depositers were not stupid in any way shape or form! And yes I do think they should have their cash replaced by mine and other tax payers money.

Edited October 10, 2008 by thefletch

[thefletch]

Also alot of the Icelandic banks are actually UK licensed (Kaupthing for example) so they are protected under our £50k garauntee anyway. The only bank I know which isn't is Icesave. Considering most people who deposited in these banks wouldn't have known which were and which weren't UK licensed and therefore covered, I would think it extremely unfair if only half were reimbursed and the government stuck two fingers up to the other half.

[Extreme_biker0]

Also alot of the Icelandic banks are actually UK licensed (Kaupthing for example) so they are protected under our £50k garauntee anyway. The only bank I know which isn't is Icesave. Considering most people who deposited in these banks wouldn't have known which were and which weren't UK licensed and therefore covered, I would think it extremely unfair if only half were reimbursed and the government stuck two fingers up to the other half.

On the contrary, I consider it extremely fair. It is the fairest thing to do.

If someone is investing £100,000 of their money, they should pay some attention to where they are putting it, especially if it is a large proportion (all) of their total savings.

You're wrong saying that these Icelandic banks have not been considered risky a while. The cost of insuring against the risk of these banks defaulting on debts has been higher than for most banks for a while. A quick google search would have revealed this, in plain and simple English.

Why should I pay for someone elses stupidity?

But as I've said, this isn't even on the cards anyway, its the FSA fund that's going to re-imburse savers, not taxpayers per-sec. But why should IceSave(ers) have access to this fund when IceSave didn't contribute??!!

Edited October 10, 2008 by Extreme_biker0

[tipsy Jock]

I think part of the reason they are stepping in is to bail themselves out. Local councils etc were told to maximise their funds by using high interest accounts by central govt. So to an extent they were simply carrying that out. I think the effect would be worse for us if they weren't bailed out. On the surface you think that it doesn't effect you, but it will. How do you think the councils will recoup those losses? Up goes council tax and down gos council spending. I'm still amazed that they had that amount of money to invest.

[Extreme_biker0]

My last post was complete bullshit BTW, icesave are FSA, so the savers are covered. Someone in here said they weren't and I believed!

But anyway...

Yeah it's local govornment that's going to lose out, and you have to feel sorry for them (and us by proxy!)...

While Mildred and Ethyl and the man on the Clapham Omnibus had the choice of investing in the icelandic banks or not, the LG's did not have the choice. The Local GOvornment Audit commission slates them for not getting the best return on investment on money they held, so for them it was a case of damned if you do, damned if you dont.

[1a2bcio8]

I was hoping for some kind of fireworks display, or at least confetti dropping from the ceiling in the style of a Blue Peter fundraising thing.

C'est la vie.

Do you mean directly in your flat and especially for you? People popping out of the cuboards with party poppers and shiny hats, screaming cliche popping words of pretend happiness about an abstract figure concerning 500 billions of squid and some banks? Sounds divine but that might be wishful thinking, Mark. Although you never know, given the current climate change.

[Extreme_biker0]

Guys, pingu is to blame.

Love,

Timmsy

Edited October 11, 2008 by Extreme_biker0

[Extreme_biker0]

What a f**king fraud, you can even see the fingerprints in his fins.

HE'S NOT EVEN f**kING REAL!!!

[Tomm]

What's the capital of Iceland?

About three pounds fifty.

[Extreme_biker0]

What's the capital of Iceland?

About three pounds fifty.

I heard Icelands assets are

frozen

.