Who was warned?

Interestingly very little has been written about this period. Except that former ministry director Baldur Gudlaugsson is on trial for selling his Landsbanki shares after a meeting with Alistair Darling in the summer of 2008.

Recent news suggest that former Icelandic national team goalkeeper and Glitnir private banking employee Birkir Kristinsson sold billions in Glitnir stock well in advance of the crash.

Interesting period indeed.

Related posts:

1. Who Got The Calls From The Invisible Hand?
2. Bankers Bonuses And Perspectives
3. Did Svafa Get The Call?

She displayed astute business sense by selling off her 1.71% share in Glitnir worth 3.5 billion ISK on the last day before it collapsed.

She then partnered with a few other fishing magnates to buy the financial wreck that was Morgunbladid, after a 4 billion ISK write off from Glitnir.

Gudbjorg’s long-time lawyer and personal advisor is one Gunnlaugur Saevar Gunnlaugsson who has served in several high-profile positions on the behalf of the Independence Party while David Oddson was its party leader.

She then took part in hiring disgraced former prime minister and central bank governor David Oddson as editor in chief, pumping money into turning the paper into a fishing lobby propaganda tool, designed to avoid reform in the fishing industry and keep Iceland away from the EU. Which has been a great success so far as the government has had to fall back on its promise of fishing industry reform and that 70% of the nation believes that bad foreigners in the EU eat poisoned food, can not wait to rob us blind, want us to speak German and eat straight cucumbers.

And now she is the tax queen of Iceland.

Related posts:

1. The Icelandic Discourse in A Nutshell
2. Economic Disaster Area
3. Morgunbladid: The Beacon Of The Free Press

At a board meeting at Glitnir it was decided that the bank would buy all the Stodir/FL Group shares from the funds. Larus Welding, CEO says in the report that he had met with Geir Haarde and Arni Mathiesen about this, as it was known that the state would becoming an owner of the bank at the time.

In a phone call with Geir, “Geir had said that this was a difficult issue but indicated, “yes, I suppose this has to be done”. Arni had not objected. The shares were bought for 10.7 billion ISK.

Larus also says that “Tryggvi Thor Herbertsson had sat with us earlier in the day and so had Illugi Gunnarsson, a board-member in these funds. Illugi emphasized strongly that this should be solved, so this was approved by the board and done.”

Geir said to the committee that he thought Larus was introducing the issue to himself and Arni but not looking for approval or denial, and to examine if they had any objections. Geir admits that “If we had said no we don’t want this at all, then I suppose they would have though this over.”

A few days earlier, the management of Glitnir bought 33 billions ISK worth of shares from the fund. Three days after, the resolution committee took over.

This is from the report, translated from Vb.is.

I urge you to read this from one year ago and ask yourself how long can somebody like Illugi hide within Althing without answering for his part in this and blatantly misleading voters?

Related posts:

1. A good solution for everyone involved
2. MP’s Answers Raise More Questions About Glitnir’s Fund 9
3. Who Were Able To Dump Their FL Group Stock Into Fund 7 and Fund 9?

The banks are now agitating for re installing bonus systems for the employees of their private banking and corporate banking divisions.

Now it is great if bonus systems are available for employees, but when implementing those some basic questions must be answered. What are we rewarding?

Remember, these are the banks whose collective bankruptcies put them in third place over the largest corporate bankruptcies in the US according to Jared Bibler of the Financial Authority!

Anywhere in the US! Ever!

Just Kaupthing manages fifth place on that list, above such luminaries as Enron, Texaco, Chrysler and Pacific Gas. Landsbankinn is in ninth place and Glitnir tenth.

The result from Iceland’s heady experiment with becoming a global financial player is three Icelandic businesses which would make the US top ten bankruptcy list!

Three!

For a country with just over 300.000 inhabitants that must be some sort of galactic record.

Those bankruptcies can hardly be blamed on the staff of the banks’ retail branches who were lending mortgages, overdrafts and credit cards. No the problems must have really started at a higher level. Like private banking and corporate banking.

And the staff is much the same as before the crash. And now they want bonuses again.

How does that work? A successful private banking employee works the phone and his contact list again and again to make money for his division. Do Stefan and Anna really pick up the phone and say, “Hey remember that 100 million you entrusted me with in 2006-2007? Yeah, shame about that. But let me tell you about the great opportunities our asset management team has discovered for you now”.

What on earth are their customers thinking?

There shouldn’t be any reason for any customers to continue banking with the same people and the same banks…unless.

Unless those same customers have benefited somehow from handsome write-offs. And that would especially make sense at the corporate level, and to a lesser extent in private banking.

Anyhow, what is going to happen if these bonuses are not approved of? Are these employees just going to stand up and leave?

And so what? Where are they going to go? Are they really sought after in the City, Wall Street, Dubai or Copenhagen? The management should at least not worry about finding enough talent to fill their shoes at this moment in time. With close to 10% unemployment and a highly educated workforce, that shouldn’t be a problem.

Social Democratic MP Robert Marshall today said that if these bonuses would become reality then they should be taxed to the hilt. A welcome sign that there still is life in that party. But would the Social Dems really dare? Or are old habits really just too hard to break?

Related posts:

1. “Why Should These People Be Paid Bonuses?”
2. Apology Accepted But Let’s Talk About This Bonus System Thing
3. Weak authority

The bank, with current CEO Birna Einarsdottir as a top manager allowed the parents of ten children to borrow up to 24 million ISK in their name.

Amid public outcry over the immorality and illegality two parents have stepped forward and cannot see what they themselves have done wrong.

Iceland in a nutshell these days. Newspaper DV has been on the case.

One of the parents, Einar Orn Jonsson blames the bank, and says it should have told him this was illegal. For children to acquire debt, approval must be had from the local authorities and that was not done. Even if it had been, it would have been unlikely to have been granted. Einar says he was operating in false hope and since the bank had approved of the loans he had seen no reason to question them.

Sigrun Karlsdottir, the wife of BYR’s former chairman of the board and mother of children who were granted loans is hurt and angry. “I am not crazy. I am very responsible as a parent. My children owned shares in BYR and participated in the hope they wouldn’t be diluted. Glitnir offered the loans and wrote to us that the only collateral would be in the shares themselves.”

Vilhjalmur Bjarnason, chairman of the Independent Investors’ Coalition says that the staff of Glitnir was  clearly unfit to work in a bank. Of course bankers often have insane people knocking at their asking for loans. The bank’s response should be “sorry, this is against all rules and laws so get out”, but in this case it didn’t. The bank knows that it cannot lend money to people who are under-age but it still does. It describes its stupidity first and foremost. These people are stupid and immoral and should not be anywhere close to finance.

The ombudsman for children has expressed outrage over the whole thing. The tragic thing is that the parents of the children will have the loans written off. So they would have reaped the benefits and not assumed the risk. A familiar theme in Icelandic banking these days.

Related posts:

1. Glitnir And Landsbanki Mortgages At A Critical Moment
2. Glitnir – one middle finger firmly stuck in the air
3. Our Chance For Children Stolen…And Other KFSFIOM Customer Tales

But what can an island of 300.000 inhabitants expect in the future? How is society supposed to be built to withstand such rampant nepotism and corruption? It will be very hard indeed, as the person sitting on the other side of the table, whether in a business meeting, at the bank or in a courtroom is likely to be someone from the golf course, the parent‘s association or even good old uncle Siggi.

The best place to start would be to implement what Hjalmar Gislason of DataMarket calls “merciless transparency”. Instead of all official documents and actions being secret unless in an situation of emergency, it should be the other way around. Everything in our government, local or state should be on the table except matters of national security.

Secrecy breeds corruption, and even worse since the economic collapse, the lingering suspicion of corruption which resides in every Icelander. There is no trust in official institutions, elected officials, bureaucrats or the business sector. The trust that is needed to build a society where people feel safe is only attainable by making everything official…well official.

The alternative is likely to make Iceland into a place where it is intolerable to live, work and pay taxes in good faith. For example, the secrecy surrounding the sale of HS Energy to Magma Energy is creating a stir in Iceland. As officials refuse to disclose the whole story and march on under the shield of secrecy, rumors are rife, and anger is brewing.

There are questions aplenty that remain unanswered in the Magma/HS case. And the word on the street is that Bjarni Armansson and Finnur Ingolfsson are behind the deal. If that were true, how badly would society react to two of the people most involved in the corrupt Icelandic economic miracle which went bust on its nation being handed the natural resources while everyone is too confused to lift a finger?

Not much is known about Magma Energy which was formed in January 2008, shortly after the REI Energy deal blew up in Bjarni Armannsson‘s, FL Group‘s and the Progressive and Independence Party‘s faces. But also while the economy was faltering and was heading downwards. It was registered on the Toronto stock market last July where three thousand investors participated. Magma currenly only owns one power plant in Nevada, with production capabilites of 23 megawatts. It has acquired research permissions in the US and South America.

Ross Beatty is the founder, main shareholder, CEO and chairman of the board of Magma. He is also chairman of Pan American Silver which is the second largest silver mining company in the world and became wealthy himself through investments in copper. The purchase in HS Energy is the largest deal made by Magma so far, albeit through a shelf-company in Sweden as foreign investment in the geothermal sector is prohibited to companies outside the European Economic Area.

The lenght of the deal, 65 years is strange compared to 10 years plus options which Magma has negotiated in the US. Over there the company is also subject to resource taxes nowhere to be found in Iceland.

But why is Ross Beatty, such a prominent businessman who even Canadian newspapers find hard to gather information about, investing in Iceland? Obviously there is an opportunity for businessmen to look for gold in the economic rubble of Iceland, but how do these kind of deals come about? And is he really investing his own cash in an unfamiliar business environment? No, not really as the deal is financed through Landsvirkjun on a loan with a due date in seven years time. An interesting lookup of Magma in Canada reveals $43m of assets on June 30, $5 m of revenue and $10 m of costs  = $5m losses so the company could not have guaranteed a loan by itself. It would need the guarantees of a director or someone else willing to back it up.

Sound familiar? If you didn‘t know better you‘d think the fingerprints of the Icelandic business-vikings were all over the case.

But we don‘t know any better because the whole deal is done behind closed doors. So therefore people are making up likely scenarios involving Capacent Glacier, Halldor J. Kristjansson, Bjarni Armannsson and Finnur Ingolfsson. That the whole deal is done to save Atorka an investment company which owns 41% of Geysir Green Energy opposite of GREF which is now owned by the solvency committee of Glitnir, and put together by Arni Magnusson, former Progressive Party minister. You might remember Finnur as the former Progressive Party Minister made billions from the privatization of Bunadarbankinn, almost Soviet-oligarch style.

Capacent Glacier which has now been consulting on the sale to Magma is basically GREF a former division of Glitnir and headed by the same person Magnus Bjarnason. The connection with Bjarni Armannsson is obvious, as Glacier Renewable Energy Fund was formed in the wake of the REI scandal where Bjarni, former Glitnir CEO was one of the main investors behind the deal.

Moreover,people are asking where is Halldor J. Kristjansson? What is the former CEO of Landsbankinn and ministry director for Finnur Ingolfsson doing in Canada of all places? Any connections to Ross Beatty, Magma? No? Who knows?

More on this story from IcelandTalks

It is impossible to expect a society without corrupt people ascending to positions of power. But in a society where information is available to the public, it is easier to trust politicians and businessmen instead of making up stories.

Is the Magma plot true? Who knows? The absence of disclosure is destructive for all parties, the public, the politicians who are under suspicion of being dirty and the businessmen who might have nothing to do with it.

In a small society, merciless transparancy would be a great stepping stone onto a better future for Iceland.

Related posts:

1. Iceland In Turmoil And Magma Energy: Something Rotten By AK72
2. Reykjavik Energy Believes ISK Will Weaken More In Seven Years
3. Organized Crime Takes Root In Iceland

Questions remain regarding the true ownership of Magma Energy, which has now gotten its hands on valuable energy resources through a game of remiscent of previous governments. Little has changed regarding keeping everything possible up on the table.

Therefore trust is hard to come by for politicians who claim they are working hard. For whose benefit should be the obvious question.

A rumour now persists that the foreign creditors who will eventually be the controlling stakeholders of Islandsbanki (formerly Glitnir, formerly Islandsbanki) are demanding that 20.000 homes whose home equity is negative.

This would be a massive blow to Icelandic society and screams out for an answer for the following questions.

Who are and will be the foreign creditors of Islandsbanki? At what price did they assume that position?

A story from visir.is indicates that the largest creditors will be comprised mostly of hedge funds, not international financial institutions like the government has maintained.

At an auction held by the International Swaps and Derivatives Association in November of last year, attemps were made to find out how the market evaluated the Icelandic banks. Usually hedge funds, insurance companies and banks buy and sell these derivatives, to either insure bonds from being called in or betting on the business not being able to service its debs.

The results were that Kaupthing’s bonds were estimated at 6,6% of face value, Glitnir’s at 4% and Landsbankinn’s at 1,25%. According to the rules of the auctions, Landsbankinn’s  is therefore deemed to be basically worthless.

Early 2009, the price received at the auction was estimated to probably be too low. That’s when they started being traded in international markets and the price rose. Kaupthing was estimated to rise to 10%, a significant increase from the auction. Glitnir’s managed an even higher jump up to 14%.

These are risky investments, as much rubble still needs to be cleared from the banks ruins and the impact of the current currency controls is still unknown. But the creditor group has changed a lot through the year, from being mostly comprised of European banks to now US hedge and insurance funds.

Their influence on the actions taken by Islandsbanki towards Icelandic households could be significant. It is to the detriment of the government that this rumor goes unanswered.

And what will happen in Icelandic society when 20.000 homes are foreclosed on and sold through auctions? Will Bjarni Armannsson or Bjorgolfur Thor come along and buy them at bargain prices? Then charge the previous owners rent for living there?

The glue that holds Icelandic society appears to be thinning every week.

Related posts:

1. Foreign Creditors Take Over Arion/Kaupthing – We Who Are Supposed To Pay Everything Have The Right To Know Everything
2. West Ham United Owners to Demand Extension From Creditors
3. Two days later – our homes are at risk

Glitnir/Islandsbanki is probably about to relieve former CEO Bjarni Armannsson of a debt of 800 million ISK, which is from a loan his own shelf-company Imagine got from the bank to purchase 12% of shares in the Norwegian business Glitnir Property Holding. Bjarni who walked out of Glitnir with 7 billion ISK says in an interview with DV that it would be an irresponsible treatment of money to pay this debt.

How does this sit with Iceland’s finance minister who recently said it was Icelanders’ moral duty to keep paying their debts even though they have grown out of proportion. “I think it is very irresponsible to encourage people to give up or stop paying. That will bring more misfortune on us all, those who are worst off and society as a whole”.

Related posts:

1. Irresponsible Treatment Of Money
2. Bjarni “more, more”
3. Bjarni Benediktsson: Were He To Have His Way It Could Further Stall Iceland’s Recovery Efforts

See here

Magnus Kristinsson is an Independence Party-made billionaire from Vestmannaeyjar who used the assets from his fishing business to borrow heavily to invest in the Toyota dealership in Iceland, the Domino’s pizza franchise, investment funds and other businesses related ot his core business of fishing. Magnus is also one of the main lunatics who have advocated for an undersea tunnel to be made from mainland Iceland to the Vestmannaeyjar islands where he lives (pop. 4.000) and the strongest hand behind shamed local MP Arni Johnsen. Magnus is now supposed to be granted a 50 billion ISK write off at Landsbankinn, as his investments have been typically Icelandic, over the top. But of course they will not pursue his fishing quota.

All of this is done with the blessing of the banks’ solvency committees, in the name of “reorganization”. Basically it means that some people in Iceland can continually run their businesses into the ground as long as they have friends in the banks that allow them to “reorganize”. It is terrible for creditors, namely the banks and their owners (formerly shareholders, now the state) but brilliant for the lucky business geniuses who can siphon out cash from the operation for themselves or use it as collateral against loans used to invest more.

The only logical explanation behind people like Jakob Valgeir and Magnus not losing their company must be that the law sees the relationship between the men and their yet uncaught fish as something sacred, like a parent’s and child’s. And therefore they are leaving their fish alone.

Related posts:

1. For Those That Get Away We Salute You
2. Financial sorcery
3. Robin Hood in reverse

In 2004, Kaupthing brought the first mortgages by a commercial bank to the Icelandic market. Glitnir and Landsbanki soon followed, as did the Savings&Loans and some smaller financial institutions.

In the first couple of weeks after Kaupthing’s announcement, Glitnir and Landsbankinn were practically in shock. A customer calling his commercial bank Glitnir to ask whether they too would offer mortgages got the reply, “I don’t know, have you tried calling Kaupthing?” and referring him to the competition.

A major difference between the Kaupthing loans and a large chunks of the other loans, the Kaupthing interest rates were fixed for the remainder of the loan while a large chunk of the others’ would see the interests re-examined every five years. Customers were told this would be quite alright, the economy might even be in a better state in five years time so they might benefit from lower rates.

So this fall is the time when the first loans meet that five year benchmark. Did you forget or are you prepared?

Related posts:

1. State Owned Banks Gearing Up For Competition
2. Children Borrowing Money From Glitnir
3. Re-Re-branding Glitnir