I have been thinking about it for a while to write about few of the most heartbreaking reasons and consequences of the Icelandic Financial Collapse. Here I will not look at the victims, but more at the devastating pitfalls the “elite” stepped into on the way.
Margrétarsjóður – I cried when I heard that Björgúlfur Guðmundsson had created a memorial fund for his daugther that died at young age, and had based it on loans, he did not seem to have had any intention to pay back. In his attempt to gain popularity in Iceland it looks like he misused the memory of his daughter.
Barnalánin – Few Icelanders in an attempt to gain power over a Credit Union used their children’s identity to get loans and buy “stocks.” When the “stocks” lost all value, children some as young as 4 years-old, inherited debts in millions of Icelandic krona.
Peningamarkaðssjóðirnir – Money Market Savings were used in a way that was never predicted by the people putting their money in there. The banks called their customers trying to convince them to move their money into this saving form, as it had less regulation than insured accounts. This did cost families and NGO’s millions of krona. Many of them older people trusting on their savings in retirement.
Icesave – When Landsbanki had no access to money on the international loan market, it decided to offer savings accounts in the Netherlands and UK offering very very high interest rate. It was to good to be true, and the money disappeared.
Einkavinavæðing – It all started with Kögun, the process of privatization in Iceland. The model created when Kögun was sold, was tweaked a bit, so the connection between the politicians selling and the buyers would be less obvious, but it still was done that way. The lowest bidder on Landsbankinn got the bank, based solely on his personal connection in the Independent Party. I don’t think even people in the party denies that.
Gengistryggð lán/ofmat krónunnar – Banks and loan companies sold individuals loans based on a foreign currency, even when the knew the krona was way overestimated.
Baugsmálið – The owners and management of Baugur, used the company, which at the time was on the stock market, to pay for their own costs. Used falsed bills to change the balanced sheet, and even took decision about their own personal business with the company. They got away with it, by using their influence in the media, which they owned, to create a smokescreen. Similar behavior was seen in a different company connected to Baugur, FL-Group, noboday has been charged in that case (yet).
Sterling-módelið – Related companies sold the Sterling Airline, back and forth to each other, and were able to get banks to finance the increased price payed. Part of the model was using a company on the stock market, FL-Group, to take some of losses, ripping of the smaller stock holders.
Seðlabankinn-Ástarbréf – In an naive way to keep the bank system in Iceland rolling the Central Bank allowed the banks to get in bed with credit unions, which sold the Central Bank, bonds without any real insurance. The Central Bank lost billions of dollars.
Neyðarlögin – In an attempt to save at least something, the government promised to insure fully all savings accounts in Iceland. We will see how that goes.
This is written in November and December 2009, maybe some of those issues will solve themselves, I surely hope so. I am aware this was not all.