Foreign Creditors Take Over Arion/Kaupthing – We Who Are Supposed To Pay Everything Have The Right To Know Everything

December 2nd, 2009 → 9:55 am @

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Foreign Creditors Take Over Arion/Kaupthing – We Who Are Supposed To Pay Everything Have The Right To Know Everything

At the end of the news article summarizing the details of the proposed transfer of Arion/Kaupthing, we find the following statement of Steingrimur J. Sigfusson, the Minister of Finance:
“The Government is satisfied that Kaupthing Bank’s creditors have acquired the majority of the share capital in Arion Bank, and it is important for the development of the Icelandic economy as a whole that the Government contributes less than originally estimated. The bank is fully capitalized and has solid financial foundations and is an important part of the new Icelandic economy. Arion Bank should be in a position to achieve the financial restructuring of companies and offer viable solutions to indebted individuals and Icelandic households.”
In other words – thanks for taking this smelly piece of garbage off of our hands, so that the government doesn’t have to pay for all that debt to the creditors – the money that Sigurdur Einarsson and friends stole from various foreigners. The bank is not officially insolvent. But the only way for you to get any money from your new investment is if the country doesn’t go down the toilet. Now it’s your decision whether or not to write off the debt to Icelandic businesses and to write down Icelandic mortgages.”
So here we have proof that the Icelandic government did not want to do anything to help Icelandic mortgage-holders because they are the bait – the insect at the end of the fishing line – used to lure the foreign creditors to take over the remnants of the banks.
The foreign creditors’ main purpose is to maximize revenue. So does anyone think they will willingly write-off any more than is absolutely necessary? Or course not. They will try to squeeze every last kronur from the struggling Icelandic homeowners, and the Icelandic government will do nothing to stop them.
There is some logic in the actions of the government, after all it is absolutely necessary for the government to avoid having to pay off the Kaupthing debt by giving the bank assets to the foreign creditors. But the whole process is very cynical, and made worse by the secrecy and lack of explanation for the government’s strategy. Why doesn’t the government simply say what is obvious now, “sorry homeowners, we can’t help you, you belong to the foreign creditors now”?Vilhjalm A. with an interesting comment:

Vilhjalm A with an interesting comment:

At the end of the news article summarizing the details of the proposed transfer of Arion/Kaupthing, we find the following statement of Steingrimur J. Sigfusson, the Minister of Finance:

“The Government is satisfied that Kaupthing Bank’s creditors have acquired the majority of the share capital in Arion Bank, and it is important for the development of the Icelandic economy as a whole that the Government contributes less than originally estimated. The bank is fully capitalized and has solid financial foundations and is an important part of the new Icelandic economy. Arion Bank should be in a position to achieve the financial restructuring of companies and offer viable solutions to indebted individuals and Icelandic households.”

In other words – thanks for taking this smelly piece of garbage off of our hands, so that the government doesn’t have to pay for all that debt to the creditors – the money that Sigurdur Einarsson and friends stole from various foreigners. The bank is not officially insolvent. But the only way for you to get any money from your new investment is if the country doesn’t go down the toilet. Now it’s your decision whether or not to write off the debt to Icelandic businesses and to write down Icelandic mortgages.”


So here we have proof that the Icelandic government did not want to do anything to help Icelandic mortgage-holders because they are the bait – the insect at the end of the fishing line – used to lure the foreign creditors to take over the remnants of the banks.

The foreign creditors’ main purpose is to maximize revenue. So does anyone think they will willingly write-off any more than is absolutely necessary? Or course not. They will try to squeeze every last kronur from the struggling Icelandic homeowners, and the Icelandic government will do nothing to stop them.

There is some logic in the actions of the government, after all it is absolutely necessary for the government to avoid having to pay off the Kaupthing debt by giving the bank assets to the foreign creditors. But the whole process is very cynical, and made worse by the secrecy and lack of explanation for the government’s strategy. Why doesn’t the government simply say what is obvious now, “sorry homeowners, we can’t help you, you belong to the foreign creditors now”?

My few cents:

- Who are the “foreign creditors”? A detailed list please. Like a blogger said yesterday, “we who are supposed to pay everything have the right to know everything”.

- How many of the foreign creditors are “recent investors”, i.e. hedge funds or investment vehicles who have bought their share at discount in the last 11 months?

- How large were those discounts?

- How do they intend to run the bank in the future?

On the write offs issue, I was on the radio show Harmageddon on Radio X yesterday where I said I don’t really have a preference for the banks being government owned or privately owned. Ultimately the government leads the way through legislation and there is work to be done there, for example installing a separation between investment banks and retail banks and removing the price indexation.

I think this “re-privatization” of the banks proves what I have been talking about regarding the government household debt solution, that it was just done to buy some time. I sure hope the creditors aren’t building their business model on expecting everyone to pay their debts as they stand because then they’ll end up with a bunch of property on their hands and bankrupt debtors leaving the country.

I for one am not going to take kindly to a smiling bank employee telling me next year that “this is now a new and different bank”, while expecting me to continue to pay my “same old loan”. So far I have paid four million to the bank in three years onto a 16 million ISK loan. The captial has not decreased, it has increased to 19.5 million ISK. What kind of society is going to stand for that kind of unfair business?

Related posts:

  1. Rumour: Foreign Creditors Demand Foreclosure Of 20.000 Homes
  2. Foreign banks welcome
  3. Kaupthing Boss – Government’s Solutions Not Enough
  4. Kaupthing In Suicide Mode
  5. Are We Supposed To Accept This? No And No Again!
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