Iceland Crisis Sends Viking Descendants Back to Norway for Jobs

By Meera Bhatia and Helga Kristin Einarsdottir

December 2 2008

Almost 1,200 years after Viking chief Ingolfur Arnarson left Norway to found Reykjavik, the crisis engulfing Iceland is forcing his descendants home.

“There are no jobs here,” said Baldvin Kristjansson, an 18-year-old former container repairman from western Iceland, at a European job fair in Reykjavik. “I’m going to move away and go to Norway.”

The Atlantic island of 320,000, suffering from its worst financial crisis since gaining independence in 1944, faces the biggest exodus in a century. Iceland’s $7.5-billion economy may shrink about 10 percent next year, according to the International Monetary Fund, which is helping provide a $4.6 billion bailout package.

About half of Icelanders aged between 18 and 24 are considering leaving the country, Reykjavik-based newspaper Morgunbladid said, citing a survey of 1,117 people between Oct. 27 and Oct. 29.

“Tens of thousands” will depart, estimated Jesper Christensen, chief analyst at Danske Bank A/S, the biggest lender in neighboring Denmark.

Iceland’s biggest wave of emigration was in the late 1800s and early 1900s. Then, 15,000 out of a total population of 70,000 left, joining a flow to North America from countries including Norway, Sweden and Ireland.

Foreign Debt

A hundred years later, Iceland’s economy is struggling after the nation’s banking system collapsed under the weight of its foreign debt last month.

Inflation surged to an 18-year high of 17.1 percent in November following a currency collapse that drove up prices. A protest against the government turned violent last week as police used pepper spray to battle activists in front of Reykjavik’s main police station.

Unemployment is forecast to rise to 7 percent by the end of January from a three-year high of 1.9 percent in October, the country’s Labor Directorate estimates.

“A lot of people are registering unemployed,” said Valdimar Olafsson at European Employment Services in Reykjavik. “It’s very hectic and Icelanders are asking for jobs, especially in Norway.”

Norse settlers arrived in Iceland around 874 on sail- powered wooden longships. The country came under Norwegian control in 1262 and then under Danish dominion in 1380. It gained autonomy 90 years ago yesterday and became fully independent from Denmark in 1944.

‘State of Coma’

The Danes and Norwegians, along with Germans and Poles, returned to pluck Icelandic talent at a job fair on Nov. 21 and 22. It drew 2,500 people.

Neither country has been fully spared from the effects of the global crunch. Denmark’s economy will shrink 0.5 percent next year, according to the Paris-based Organization for Economic Cooperation. Norwegian economic growth more than halved to 0.2 percent in the third quarter.

Both remain in much better shape than Iceland, though, and Norwegian and Danish companies are seeking skilled workers.

“Iceland is more or less in a state of coma,” said Sigrun Thormar, who runs a consulting business for Icelanders moving eastward. “There’ll be an increase in the number of Icelanders seeking work in Denmark.”

Danish unemployment is 1.6 percent. In Norway, the jobless rate rose to 1.8 percent last month from 1.7 percent the previous month. Norway’s Labor and Welfare Administration, or NAV, expects unemployment to stay below 3 percent over the next two years.


Kristiansand-based Teknova, a research institution looking for scientists, and Billingstad-based Aibel AS, a provider of products and services to the oil and gas industry, are among Norwegian companies seeking Icelandic workers.

In total, NAV has 350 vacancies posted, according to Ragnhild Synstad, an adviser at NAV EURES who attended the job fair.

“I have been absolutely swamped with employers that are interested,” said Synstad. “The response was overwhelming. We heard some very sad stories about families who have lost everything.”

Stefan Gudjonsson, 37, who was let go from his job as an account manager at an information technology company, said he may have to leave his 6-year-old son behind for work elsewhere.

“I don’t like the look of things right now and also worry about what has yet to happen,” he said. “People are trying their best to be optimistic, but the prospects look anything but good.”


Protest in “Iceland” ends in Violence

Published in: on December 3, 2008 at 8:54 am  Comments Off on Iceland Crisis Sends Viking Descendants Back to Norway for Jobs  
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Germany to provide a 308-million euro loan to Iceland

November 22 2008


Germany said on Saturday it would provide a 308-million euro loan to Iceland’s deposit guarantee fund so it could pay back savings of German clients of Kaupthing bank, which was taken over by the Icelandic state last month.

The International Monetary Fund this week approved a $2.1 billion loan for Iceland. The loan had been held up due to a dispute between Iceland, Britain and the Netherlands over how to repay savers with deposits in frozen Icelandic accounts.

German savers also had money locked up.

German Finance Minister Peer Steinbrueck told Tagesspiegel daily the German savers would get their money back in full.

The German loan would total 308 million euros, the amount savers in Germany had held at Kaupthing

Iceland was caught in the global financial crisis as its currency plunged and its financial system crashed last month under the weight of tens of billions of dollars of foreign debts incurred by its banks, three of which failed.

Britain, the Netherlands and Germany issued a statement last week saying they would provide “pre-financing” to help Iceland meet foreign deposit obligations. The IMF, in a conference call on Thursday, estimated those obligations at $5-6 billion.

A British finance ministry source said Britain would lend Iceland 2.2 billion pounds ($3.27 billion). The Netherlands said it was working on aid to help cover 1.2 billion ($2.63 billion) to 1.3 billion euros of Dutch deposits held in Icelandic accounts.

Kaupthing said last week it hoped to pay back customers of German operations in the next few days or weeks.

Germany’s financial watchdog BaFin has implemented a temporary moratorium for the German unit of Kaupthing and the bank said it had been working on an agreement with the German government in recent weeks.

(Reporting by Andreas Moeser; Writing by Kerstin Gehmlich)


BREAKING NEWS: Iceland IMF loan approved

Iceland’s Economic Meltdown is a big Flashing Warning Sign

Published in: on November 23, 2008 at 6:47 am  Comments Off on Germany to provide a 308-million euro loan to Iceland  
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BREAKING NEWS: Iceland IMF loan approved

November 20 2008

By Alex Elliot

The Executive Board of the International Monetary Fund (IMF) has just confirmed that it will extend the requested USD 2.1 billion loan to Iceland, according to

In addition to this, the Finns, Swedes, Norwegians and Danes intend to lend Iceland some USD 2.5 billion. Reuters quoted a senior Finnish politician as saying that the Norwegians will provide USD 631 million of that sum; but it is not yet known how the rest will be split between Finland, Sweden and Denmark.

Earlier today, the Finnish business paper, Kauppalehti stated that in addition to the above loans, the Icelanders are also likely to receive a USD 500 million loan from Russia and funding from Poland, the Faroe Islands and the European Union.

IceNews will bring further details on the implications of this news as it comes to light over the next days.


Iceland gets $2.1 billion loan from the IMF

By Robert Daniel

Nov. 20, 2008

The International Monetary Fund approved a two-year standby arrangement for Iceland, in which the country will receive a $2.1 billion loan, the agency said on Thursday.

Additional loans totaling as much as $3 billion have been secured from Denmark, Finland, Norway, Poland, Russia and Sweden.

The Faroe Islands will also lend Iceland $50 million.

The IMF will provide $827 million of its loan immediately with the rest in eight installments of $155 million each. Iceland will repay the loan during 2012 through 2015, the agency said.


Nice to see the other countires coming to the aid of Iceland.

Lets hope things improve.

Considering everything they have been through, they need their friends.

The people in Iceland are good people and desrve to be treated as such.

Published in: on November 20, 2008 at 9:24 am  Comments Off on BREAKING NEWS: Iceland IMF loan approved  
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The Icelandic Government program with the IMF


Reykjavik, Iceland

November 17 2008

In the wake of the recent international financial turmoil, Iceland’s economy is facing a banking crisis of extraordinary proportions. The economy is heading for a deep recession, a sharp rise in the fiscal deficit, and a dramatic surge in public sector debt – by about 80%. Potentially substantial capital outflows could lead to a further large loss in the value of the króna. In the context of the high leverage in the economy, this would produce massive balance sheet effects and a substantial contraction in domestic activity. The immediate challenges are, therefore, to restore a functioning and viable banking system, and to stabilize the króna. Looking further ahead, the challenge will be to reduce a very high level of public debt, by embarking on a process of sustained fiscal consolidation.

Banking sector restructuring and insolvency framework reform
The Icelandic government is committed to progressing a sound and transparent process as regards depositors and creditors in the intervened banks. Constructive work is being carried out towards comparable agreements with all international counterparts for the Iceland deposit insurance scheme in line with the EEA legal framework. Under its deposit insurance system Iceland is committed to recognize the obligations to all insured depositors. This is done under the understanding that prefinancing for these claims is available by respective foreign governments and that Iceland as well as these governments is committed to discussions within the coming days with a view to reaching agreement on the precise terms for this prefinancing. Furthermore, it is recognized that the payment by the new banks of the fair value for the assets transferred from the old banks is a key factor in the fair treatment of depositors and creditors in the intervened banks. Accordingly, we have instituted a transparent process involving two sets of independent auditors to establish the fair value of the assets. More generally, the fair, equitable and non-discriminatory treatment of depositors and creditors will be ensured in line with applicable law.

The bank regulatory framework and supervisory practice will be reviewed to strengthen the safeguards against potential new crises. Previous senior managers and major shareholders in intervened banks who are found to have mismanaged the banks should not assume similar roles for at least three years.

The insolvency framework to manage deleveraging and recovery in the banking, corporate and household sectors in an efficient manner will be reviewed.

Fiscal policy
Preliminary estimates suggest that the gross cost to the budget of honoring deposit insurance obligations and of recapitalizing both commercial banks and the Central Bank of Iceland could amount to around 80 percent of GDP and the general government deficit will be 13.5 percent of GDP in 2009. Overall, gross government debt could rise from 29 percent of GDP at end-2007 to 109 percent of GDP by end-2009. The net cost will be somewhat lower on the assumption that money can be recovered by selling assets from the old banks.

In order not to exacerbate the recession, the fiscal deficit will be allowed to widen to the extent that this is driven by higher expenditures and lower revenues due to the effects of the economic cycle. But given the high financing need and the dramatic increase in public sector debt, a planned discretionary fiscal relaxation in 2009 will be significantly scaled back.

The intention is to reduce the structural primary deficit by 2–3 percent annually over the medium-term, with the aim of achieving a small structural primary surplus by 2011 and a structural primary surplus of 3½-4 percent of GDP by 2012. A thorough analysis of the fiscal framework will be conducted and recommendations made, including on how local government finances can be better aligned with the governments’ overall fiscal plans.

Monetary and exchange rate policy
The immediate challenge facing the Central Bank of Iceland is to stabilize the króna and set the stage for a gradual appreciation. It can be expected that the króna will face near-term risks of pressure when the normal functioning of the foreign exchange market is restored. Extraordinary measures are therefore needed to deal with short-term risks and prevent substantial capital outflows.

In the very short-run, we intend to adopt the following pragmatic mix of conventional and unconventional measures:
• To raise the policy interest rate to 18 percent. The Central Bank stands ready to increase it further, but it is unclear that higher interest rates alone will suffice to stem capital outflow.
• Tight control over banks’ access to Central Bank credits will be maintained to avoid excessive liquidity being drawn down through this route.
• The Central Bank stands ready to use foreign reserves to prevent excessive króna volatility.
• Furthermore, the Central Bank is willing to temporarily maintain restrictions on capital account transactions. Such restrictions have considerable adverse implications and the intention is to remove them as soon as possible.

This process of normalization and lower inflation and interest rates can start as soon as the króna stabilizes in the foreign exchange market, all demand for foreign exchange in respect of current account transactions is met in the foreign exchange market, and there is no longer need to support the market by drawing on the reserves. Following the above mention actions, the króna could strengthen quickly and annual inflation will have fallen to 4½ percent at end-2009. Additional strengthening of the króna and further disinflation is expected in 2010. This will allow us to begin to ease control over Central Bank’s credit volume and increasingly rely on the policy interest rate as the primary monetary policy instrument, in the context of a flexible exchange rate policy.

Incomes policy
It will be important to have a national consensus consistent with the objectives of the macroeconomic program. Historically, income policy in Iceland has been very effective, with past agreements supporting the economic adjustment when difficult circumstances demanded it. Social partners recognize the need to enter an agreement that is commensurate with the severity of the situation.

Publishing and Parliamentary Procedure

A Letter of intent was sent to the IMF on November 3, signed by the Minister of Finance and the Chairman of the Board of Governors of the Central Bank. The Executive Board of the IMF will put Iceland’s plan on its agenda on Wednesday November 19. At the same time IMF’s Staff Report will be published.

Today, November 17, the plan was put before the Parliament and will be discussed there later this week.

A special information Web Page has been opened as a part of the Web Page of the Prime Minister’s Office, Among its contents are the Letter of intent in Icelandic and English, explanatory texts on every article of the LOI and other relevant information.


Published in: on November 17, 2008 at 10:05 pm  Comments Off on The Icelandic Government program with the IMF  
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Belarus threatens to quit IMF

November 16 2008
Cash-strapped Belarus has said it may turn its back on the International Monetary Fund if the organization refuses to give it a US$ 2 billion loan.

The hard-line President of the former Soviet state, Aleksandr Lukashenko, issued the warning in an interview to the Wall Street Journal, which was broadcast on Belarusian TV on Friday.

“We survived without IMF loans before, during the severest of times” he said. “If they deny it now, we will build our co-operation with the IMF accordingly”.

This means the country would likely to sever ties with the IMF, often described as the international lender of last resort.
“I have told the government and the chairman of the National Bank that if they don’t help us in our situation – which is not as bad as in other countries to which they [the IMF] give loans – why should we co-operate?” Lukashenko said.

The hard-line leader added that as a member of the IMF, Belarus had regularly contributed money to the fund and taken part in its meetings.

“So what for do we need it all, if we are treated like this?” the Belarusian president concluded.

Published in: on November 17, 2008 at 7:09 am  Comments Off on Belarus threatens to quit IMF  
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World Leaders Must Roll Back Radical WTO Financial Service Deregulation

Nov. 14, 2008

To Address Crisis, World Leaders Must Roll Back Radical WTO Financial Service Deregulation Requirements, not Push WTO Doha Round’s Further Financial Sector Deregulation

Bush’s Stubborn, Ideological Defense of Market-uber-alles Global Economic Deregulation Model Threatens Summit’s Prospects

WASHINGTON, D.C. – Remedying the financial crisis will require significant changes to existing World Trade Organization (WTO) rules that lock in domestically and export worldwide the extreme financial services deregulatory agenda favored by the world’s banking and insurance giants that fostered the crisis, Public Citizen said.

“President Bush’s insistence that further deregulation and liberalization is the solution to addressing the financial crisis spawned by radical financial services deregulation is the sort of backwards, ideological approach that could squander the prospects that Saturday’s summit produces any remedies for the crisis,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division.

Calls by many other world leaders for new global financial services regulation have been accompanied by a seeming total lack of awareness that most of the world’s countries are bound to expansive WTO financial services deregulation requirements to stay out of the business of regulating financial services. More than 100 countries signed the 1997 WTO Financial Services Agreement.

Despite the pervasive role of the WTO in worldwide financial service deregulation, in the lead up to this Saturday’s G-20 Global Financial Crisis Summit in Washington, D.C., the only comments regarding adherence to global trade rules have been of the red herring variety: panicky warnings about the perils of countries raising tariffs to block imports in response to dire economic conditions – something no country has proposed.

In contrast, in recent weeks, the Bush administration and governments worldwide have taken various measures to counter the crisis. These measures contradict the fundamental precepts of the current globalization model – and in some cases violate the rules implementing this model, such as those of the WTO. Plus, many of the most basic national and international remedies now being proposed to fix the mess and avoid future meltdowns occupy policy space that governments ceded to the WTO a decade ago.

“Altering the WTO financial services rules is critical for creating domestic policy space to address the crisis,” Wallach said. “However, even in the face of this crisis, the United States and the European Union are pushing for further financial services liberalization in the ongoing WTO Doha Round, the conclusion of which they are now pushing as a cure to the crisis, even as they find that flaunting the existing WTO terms is the necessary course of action.”

As part of its original WTO commitments, the United States agreed to conform a broad array of financial services – including banking, insurance and other financials services – to comply with WTO rules.

“Unless the radical financial services deregulation agenda that has been aggressively promoted and entrenched by the WTO, World Bank and International Monetary Fund is understood as a source of the current crisis, reform proposals will not address the crisis’ root causes,” Wallach said.

For more information about the WTO’s role in the crisis, read our memo to reporters, Elimination of WTO’s Radical Financial Service Deregulation Requirements Must Be Addressed at Nov. 15 Summit.


Letter to U.S. Congress from 243 Civil Society Groups in 90 Developing Countries: To Combat Global Poverty and Allow Developing Countries to Develop Please Reject Pressure to Give President Bush New Fast Track Authority to Push WTO Escalation Via the Doha Round

More Fair Traders have been elected.

Fair Trade Gets an upgrade

The GM genocide: Thousands of Indian farmers are committing suicide after using genetically modified crops

The World Bank and IMF in Africa

Published in: on November 15, 2008 at 7:30 am  Comments Off on World Leaders Must Roll Back Radical WTO Financial Service Deregulation  
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Japan to offer $100bn to help IMF meet funding demands

November 14, 2008

Japan is preparing to offer $100 billion (£68.3 billion) of its foreign exchange reserves to bolster the International Monetary Fund’s (IMF) coffers, government sources have told The Times.

Senior government sources in Tokyo added that Japan’s proposals at today’s Group of 20 industrialised and emerging nations meeting in Washington could go beyond the huge financial endowment to the IMF and would seek to make Taro Aso, Japan’s Prime Minister, the “Gordon Brown of Asia”.

Among Mr Aso’s reading material for the 11-hour flight to the US capital, is a proposal from within his own party that suggests establishing a vast “World Stabilisation Fund” that would invite contributions from forex reserves held by governments everywhere.

Kotaro Tamura, a ruling party MP, said: “By showing that Japan is taking a lead in saving the world and by becoming more aggressive in offering solutions to the financial crisis, Mr Aso could be a star – he would be respected like Gordon Brown.”

The immediate Japanese offer to the IMF, expected to be unveiled today in Washington, is designed to increase substantially the IMF’s ability to lend to emerging economies savaged by the global financial crisis.

Countries in Eastern Europe have already been forced to accept loans from the IMF, but economists are giving warning that the risk of meltdown could soon emerge in Asia. Japan is already the second-largest donor to the IMF, and has the world’s second-

largest coffer of foreign reserves – some $980 billion.

Mr Aso, will announce the offer at today’s G20 meeting, but government sources say that he will “gauge the mood of international co-operation” before suggesting any further measures.

Finance ministry sources confirmed that Mr Aso was “preparing to demonstrate Japan’s commitment to global financial stability through its foreign reserve strength”, and that “the ability of the IMF to lend aggressively through this crisis must be a priority”.

Although details of the plan have not been widely disclosed throughout the Government, it is understood that the reserves – already mostly held in the form of US Treasuries – would be offered as collateral for the IMF as it attempted to raise funds as emergency needs arise.

Japan is proposing to lend about 10 per cent of its reserves to ensure that the IMF is itself able to meet its funding demands.

However, the loan will need to be structured carefully, said Japanese government sources, so that the facility does not actually lead to a sell-off of US Treasuries in an already unstable market.

The Japanese Government is privately hoping that its actions will prompt other nations with hefty foreign reserves to make similar offers to the IMF, though it is likely to stop short of making an explicit demand that others follow suit.

China, with even larger reserves than Japan, is viewed as a likely candidate to provide collateral, as are Middle Eastern oil producers.


Japan Bailing out the IMF Alrighty then.

One thing leads to another and another:

  1. So now countries have to bailout the IMF
  2. Who is bailing out countries
  3. Who need bailouts
  4. To bailed out their banks
  5. Who need bailouts
  6. Because of the US mess.

How interesting it all is.

Before you know it the Countries who Bailed out the IMF will need bailouts to pay for the money given to the IMF for Bailouts.

So who will be left to Bail them out I wonder?

Japan should just cut out the middle man and bailout the countries on it’s own.

That would save money in the end I am sure.  Middle men always have to get a cut out of any transaction.

Can Anyone Halt The Mortgage Meltdown?

Wall Street and Washington come together to help troubled mortgage borrowers. Too late?

Fifteen months into the worst credit crisis in decades, major banks and the federal government are coming together on a solution for struggling mortgage borrowers.

The goal is to hasten the process for renegotiating hundreds of thousands of delinquent loans, either those held by major banks or held by Fannie Mae and Freddie Mac , the mortgage finance giants that faltered and were taken over by the government this summer.

Renegotiating loans for struggling homeowners has taken on more urgency as jobless claims rise and the economy declines. Housing prices continue to fall, leaving many with mortgages greater than the value of their homes, and banks continue to suffer major credit losses as a result.

Citigroup , JPMorgan Chase and Bank of America have separately announced plans to help ailing borrowers. On Tuesday, the Federal Housing Finance Agency, the regulator for Fannie and Freddie, announced its own sweeping plan.

The agency is targeting delinquent borrowers who haven’t filed for bankruptcy. The goal is to modify mortgages for borrowers who can support payments but make sure those payments don’t make up more than 38% of income.

James Lockhart, head of the agency, urged U.S. mortgage servicing firms–companies that process payments of loans rather than owning them outright–to adopt the plan as a national standard.

For the government, halting the steady slide in housing prices is the holy grail of all of its big plans to prop up the ailing banking system. It is throwing trillions of dollars at shoring-up banks caught in the housing mess, but nothing has, so far, put a floor under the plunging housing prices at the heart of the credit crisis. Going at the problem from the perspective of a borrower is yet another way to achieve that end.

The government studied the Federal Deposit Insurance Corp.’s approach to modifying loans of failed IndyMac Bank and used that as the model for this broader program.

Neel Kashkari, the Assistant Treasury Secretary in charge of the department’s $700 billion Troubled Asset Relief Program, said the plan will take pressure off mortgage servicing companies, “helping ensure that borrowers do not fall through the cracks because servicers aren’t able to get to them.”

Earlier on Tuesday, Citigroup announced its loan modification plan. The bank is stopping foreclosures for borrowers who live in their own homes and have enough income to stand a chance at repaying a renegotiated loan. It will also expand the program to include mortgages for which the bank collects payments but does not own.

Over the next six months, Citi will contact 500,000 borrowers who are not currently delinquent but close to falling behind to see if those loans could be modified.

Two weeks ago, JPMorgan said it would expand its mortgage modification program to an estimated $70 billion in loans, representing 400,000 borrowers. That is on top of the $40 billion in mortgages JPMorgan has rewritten since early 2007.

Bank of America will begin next month modifying 400,000 loans held by Countrywide Financial, the troubled lender it acquired this year. The plan, which starts Dec. 1, is part of an $8.4 billion legal settlement with 11 states.

Loan modifications have been complicated by the way the banking industry has approached mortgage lending in recent years, selling their loans off to other banks that bundle and resell them as securities rather than holding all loans separately.

For the banks, modification plans are self-preservation. Virtually no bank has been left untouched by the credit crisis, and Citi, JPMorgan, Bank of America and others will undoubtedly have rising credit costs for the next few quarters. Any plan to blunt those costs would be welcomed.


Well I don’t really have a lot of faith in these guys. They are in great part the cause.  These very banks are the ones that had to get bailouts and now they are going to fix it are they?

Trusting them is a lot like letting the fox guard the chickens coup.

Dutch, British block IMF loan to Iceland – NRC

November 7 2008

The Netherlands and Britain are blocking a €2.1bn loan from the International Monetary Fund to Iceland pending agreement on compensation for Dutch and British savers, the NRC reports on Friday.

The paper says Icelandic MPs were told at a meeting in Brussels that the loan would not be approved until the financial aspects of compensating hundreds of thousands of savers has been worked out.

Sources at the Dutch finance ministry have confirmed the veto off the record but refuse to comment officially. Nor would British officials comment, the paper says.

Yesterday, Iceland’s prime minister Geir Haarde said that the IMF loan and the repayment agreement were ‘two separate issues which should not be linked,’ the paper said.

Dutch savers have some €1.6bn on deposit at Icesave which they cannot access.

Meanwhile, the conflict between the government, the province of Noord-Holland and 22 local councils over their claims against Iceland escalated on Friday. In total, local governments have some €400m in Icesave.

Finance mnister Wouter Bos and the queen’s commissioner in Noord-Holland have been embroiled in a public spat over the province’s determination to go it alone in trying to recover its money.

On Friday home affairs minister Guusje ter Horst said the government had used a royal decree to annul local government claims to Landsbanki property abroad. ‘Their behaviour is hindering the difficult and complex discussions with the Icelandic government,’ she said.


Maybe Iceland should just declare bankruptcy.

Seems all the way around things just are getting more ridiculous.

All the banks have being going through the same thing but it seems Iceland is really being hung out to dry.

Of course I have little or no trust when it comes to the IMF at any rate.

Maybe not getting a loan from them is a “good thing”.

There certainly seems to be a lot of manipulation going on when it comes to Iceland.

A few tid bits.

Iceland to Receive Unexpected Loan from Poland

Norwegian loan to Iceland confirmed

Iceland lifts interest rates to record 18% to secure IMF $2bn loan

Iceland Registers Complaint about Britain to NATO

Unbowed Icelandic PM sends a strong message to UK

Iceland ‘working day and night’

UK Government ‘ignored Iceland warning’/ Charities may lose

The worst of all was being treated as a Terrorist country.

Browns actions have not helped in any way.

Prime Minister Gordon Brown has condemned Iceland’

Published in: on November 10, 2008 at 5:17 am  Comments Off on Dutch, British block IMF loan to Iceland – NRC  
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Real Change Depends on Stopping the Bailout Profiteers

To understand the meaning of the U.S. election results, it is worth looking back to the moment when everything changed for the Obama campaign. It was, without question, the moment when the economic crisis hit Wall Street.

Up to that point, things weren’t looking all that good for Barack Obama. The Democratic National Convention barely delivered a bump, while the appointment of Sarah Palin seemed to have shifted the momentum decisively over to John McCain.

Then, Fannie Mae and Freddie Mac failed, followed by insurance giant AIG, then Lehman Brothers. It was in this moment of economic vertigo that Obama found a new language. With tremendous clarity, he turned his campaign into a referendum into the deregulation and trickle down policies that have dominated mainstream economic discourse since Ronald Reagan. He said his opponent represented more of the same while he stood for a new direction, one that would rebuild the economy from the ground up, rather than the top down. Obama stayed on this message for the rest of the campaign and, as we just saw, it worked.

The question now is whether Obama will have the courage to take the ideas that won him this election and turn them into policy. Or, alternately, whether he will use the financial crisis to rationalize a move to what pundits call “the middle” (if there is one thing this election has proved, it is that the real middle is far to the left of its previously advertised address). Predictably, Obama is already coming under enormous pressure to break his election promises, particularly those relating to raising taxes on the wealthy and imposing real environmental regulations on polluters. All day on the business networks, we hear that, in light of the economic crisis, corporations need lower taxes, and fewer regulations — in other words, more of the same.

The new president’s only hope of resisting this campaign being waged by the elites is if the remarkable grassroots movement that carried him to victory can somehow stay energized, networked, mobilized — and most of all, critical. Now that the election has been won, this movement’s new missions should be clear: loudly holding Obama to his campaign promises, and letting the Democrats know that there will be consequences for betrayal.

The first order of business — and one that cannot wait until inauguration — must be halting the robbery-in-progress known as the “economic bailout.” I have spent the past month examining the loopholes and conflicts of interest embedded in the U.S. Treasury Department’s plans. The results of that research can be found in a just published feature article in Rolling Stone, The Bailout Profiteers, as well as my most recent Nation column, Bush’s Final Pillage.

Both these pieces argue that the $700-billion “rescue plan” should be regarded as the Bush Administration’s final heist. Not only does it transfer billions of dollars of public wealth into the hands of politically connected corporations (a Bush specialty), but it passes on such an enormous debt burden to the next administration that it will make real investments in green infrastructure and universal health care close to impossible. If this final looting is not stopped (and yes, there is still time), we can forget about Obama making good on the more progressive aspects of his campaign platform, let alone the hope that he will offer the country some kind of grand Green New Deal.

Readers of The Shock Doctrine know that terrible thefts have a habit of taking place during periods of dramatic political transition. When societies are changing quickly, the media and the people are naturally focused on big “P” politics — who gets the top appointments, what was said in the most recent speech. Meanwhile, safe from public scrutiny, far reaching pro-corporate policies are locked into place, dramatically restricting future possibilities for real change.

It’s not too late to halt the robbery in progress, but it cannot wait until inauguration. Several great initiatives to shift the nature of the bailout are already underway, including I added my name to the “Call to Action: Time for a 21st Century Green America” and invite you to do the same.

Stopping the bailout profiteers is about more than money. It is about democracy. Specifically, it is about whether Americans will be able to afford the change they have just voted for so conclusively.


Published in: on November 8, 2008 at 4:42 am  Comments Off on Real Change Depends on Stopping the Bailout Profiteers  
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Iceland awaits IMF decision on Monday

A decision on whether or not Iceland will receive its requested loan from the IMF has been delayed again for two days. The decision is now expected on Monday.

The Icelandic PM says he is entirely confident that the USD 2.1 billion loan will be granted, and that a wider 6 billion dollar rescue package will be agreed upon as a result.

The delay is blamed on IMF coordination with the Nordic countries. Some sources claim the IMF is waiting for the Nordic countries to commit money beforehand; while others claim the Nordic countries are waiting for the IMF’s confirmation before they pledge support.

PM Geir H. Haarde believes the weekend’s hurdles will be easy to conquer – although, if true, it could potentially become a frustrating situation.

Norway and the Faroe Islands have already pledged to lend Iceland money. The final rescue deal is expected to include cash from the IMF, the Nordic bloc, the UK, Netherlands and Poland. The participation of the USA, Russia and the European Central Bank has not yet been confirmed or denied.

The Prime Minister denies credible rumours that the delay is caused by IMF unease over Iceland’s ongoing negotiations with the Netherlands and the UK over frozen savings accounts.


Published in: on November 8, 2008 at 3:23 am  Comments Off on Iceland awaits IMF decision on Monday  
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Orissa seeks Rs 1,250cr World Bank loan under OSEP

BS Reporter / Bhubaneswar

November 06, 2008

The Orissa government has sought Rs 1,250 crore ($250 million) loan from the World Bank under the third tranche of the Orissa Socio Economic Development Programme (OSEP).

It has already sent the proposal for loan assistance to the Government of India (GoI) to be forwarded to the World Bank for approval.

This was communicated to the visiting four member World Bank team by the state government today. During the discussion with the World bank team, the state government apprised them of various steps taken by it relating to anti-corruption measures, introduction of e-procurement system and financial management.

Talking to the media after discussion with the senior state government officials at the secretariat, VJ Ravishankar, lead economist, South Asia Poverty Reduction and Economics Management of World Bank said, the state government has sought a loan of $250 million from the World Bank under the third tranche OSEP.

The Bank will consider the request for loan after the GoI sends a letter in this matter, he added. The Orissa government availed $125 million in the first tranche and $225 million in the second tranche of OSEP.

Ernesto May, sector director, poverty reduction, economic management, finance and private sector development of the World Bank, South Asia region, said, the overall performance of the state government has been very satisfactory. The World Bank team will work together with the Orissa government to assess the overall situation, he added.

The team members later had a look at the Orissa Treasury Management System and computerisation of accounting system in the Controller of Accounts office.


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Throwdown: Bank of America vs. JPMorgan

By Morgan Housel

November 6, 2008

Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM).

They’re both huge. They’ll both be survivors. Both received a $25 billion investment from the Treasury. One picked up Countrywide when it looked ready to fail, the other picked up WaMu when it did fail. One bought Merrill Lynch (NYSE: MER) before a pending disaster, the other bought Bear Stearns after a historic disaster.

I smell a fight brewin’. Let’s watch these two go head-to-head and crown the king of the megabanks.

A year to forget
JPMorgan has certainly fared better than B of A in the past year: Shares are down 13% and 56%, respectively. Even so, if you compare the two on a variety of different metrics, you’ll be hard-pressed to find a clear front-runner. Both companies are well capitalized — especially after Hank Paulson’s early Christmas gift — and have ample reserves to cover future losses, and both have kept nonperforming loans and net charge-offs at levels that shouldn’t keep you from losing too much sleep, which is about all you can ask for these days.

While the similarities abound, shareholders have to grapple with a huge wild card to assess the quality of these two: the impact of mammoth acquisitions made in the past year. Comparing past results seems irrelevant, since the B of A and JPMorgan of next year will be completely different beasts than the B of A and JPMorgan of this year.

Everything must go!
Both banks shocked the financial world with four monster deals this year: Countrywide, Bear Stearns, WaMu, and Merrill Lynch (pending). The deals are serious game-changers, since they give B of A and JPMorgan the chance to close the investment-banking gap with Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS), and the real-estate gap with Wells Fargo (NYSE: WFC) — especially in light of its pending Wachovia (NYSE: WB) acquisition.

Better yet, all of these deals were made with companies that either had, or likely would have, failed. It only makes sense, then, that they were struck at fire-sale prices … which most were. Countrywide was bought for about $4 billion — one-third of its tangible book value at the time. JPMorgan paid no more than what Bear Stearns’ New York office building was valued at, and has the government backing some of Bear’s riskiest assets. WaMu was acquired from the FDIC for a token amount just five months after JPMorgan originally offered $8 per share.

The one exception to this bargain-bin rampage? Bank of America’s pending $50 billion acquisition of Merrill Lynch.

Whereas JPMorgan was practically handed Bear Stearns, B of A actually paid a premium to Merrill’s book value — and did it without any government help. Why’d it pay up? Your guess is as good as mine. You’d think a deal struck at a time when Merrill likely would have failed without a partner would have been done at terms B of A would be salivating over, yet Merrill Lynch appeared to come out with the bargaining power on this one.

Now — without comparing the differences between Bear Stearns and Merrill Lynch — we have something material to distinguish B of A from JPMorgan: Merrill Lynch could easily end up being a $50-billion blunder for B of A, especially if the economy continues to upend the finance world as we know it. JPMorgan’s deal with Bear Stearns, on the other hand, will likely go down as “the deal of the century” even if Wall Street continues to flounder, simply because it paid so little for it. That fact alone shifts the probability of success in the coming years comfortably into JPMorgan’s corner.

The verdict
Two great banks. Two survivors in a hollowed-out industry. Two stocks that will likely look like bargains five or 10 years down the road when — dare I say it — the credit crunch could be long gone.

But since so much of B of A’s future is now hinged on the moot assumption that the $50 billion offered for Merrill will eventually bear fruit, I’d put the odds of big returns in the coming years leaning more toward JPMorgan Chase.


A Crisis Made in the Oval Office

Economist explains how conservatives engineered financial free-fall

Wall Streeters are just Welfare Recipiants in Disguise

Stock Market, History,Causes and Affects

Published in: on November 6, 2008 at 8:58 pm  Comments Off on Throwdown: Bank of America vs. JPMorgan  
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Foreign currency loan crux for fomer communist bloc

November 5 2008

Eastern European markets are feeling the pinch as investors pull money out of the region and local currencies plunge. Plunging domestic currencies mean higher monthly payments for businesses and households repaying foreign-denominated loans, forcing them to scale back spending.

In Budapest, project manager Imre Apostagi says the hospital upgrade he’s overseeing has stalled because his employer can’t get a foreign-currency loan.

The company borrows in foreign currencies to avoid domestic interest rates as much as double those linked to dollars, the euro and Swiss francs. Now banks are curtailing the loans as investors pull money out of eastern Europe‘s developing markets and local currencies plunge.

“There’s no money out there,” said Mr Apostagi, a project manager who asked that the medical-equipment seller he works for not be identified to avoid alarming international backers.

“We won’t collapse, but everything’s slowing to a crawl. The whole world is scared and everyone’s going a bit mad.”


Foreign-denominated loans helped fuel eastern European economies including Poland, Romania and Ukraine, funding home purchases and entrepreneurship after the region emerged from communism.

The elimination of such lending is magnifying the global credit crunch and threatening to stall the expansion of some of Europe’s fastest-growing economies.

“What has been a factor of strength in recent years has now become a social weakness,” said Tom Fallon, head of emerging markets in Paris at La Francaise des Placements, which manages $11bn.

Since the end of August, the Hungarian forint has fallen 16pc against the Swiss franc, the currency of choice for Hungarian homebuyers, and more than 8pc against the euro.

Foreign currency loans make up 62pc of all household debt in the country, up from 33pc three years ago.

Romania’s leu dropped more than 14pc against the dollar and 3.2pc against the euro.

Poland’s zloty declined more than 17pc against the dollar and 6.8pc against the euro, and Ukraine’s hryvnia plunged 22pc to the dollar and 11.5pc to the euro.

That’s even after a boost this week from an International Monetary Fund (IMF) emergency loan programme for emerging markets and the US Federal Reserve‘s decision to pump as much as $120bn into other developing countries.

The Fed said yesterday that it aims to “mitigate the spread of difficulties in obtaining US dollar funding”.

In Kiev, Ukraine, Yuriy Voloshyn, who works at a real-estate company, says he’s decided to abandon plans to buy a new television because of his dollar-based mortgage. His monthly payments have risen by 18pc, or 1,000 hryvnias (€130), since he took out the loan seven months ago.

“I only have money to pay for food and my monthly fee to the bank,” Mr Voloshyn(25) said. “I can’t even dream about anything else.”

Rafal Mrowka, a driver from Ostrow Wielkopolski in western Poland, says he became addicted to checking foreign currency rates as monthly installments on his Swiss-franc mortgage jumped 25pc.


“I’ve even stopped getting nervous, now I can only laugh,” the 32-year-old, first-time property owner said.

The bulk of eastern Europe’s credit boom was denominated in foreign currencies because they provided for cheaper financing. For example, Hungarian consumers borrowed five times as much in foreign currencies as in forint in the three months to June.

Now banks including Munich-based Bayerische Landesbank and Austria‘s Raiffeisen International Bank Holding AG are curbing foreign-currency loans in Hungary.

In Poland, where 80pc of mortgages are denominated in Swiss francs, Bank Millennium SA, Getin Bank SA and PKO Bank Polski SA have either boosted fees or stopped lending in the currency.

The extra burden on borrowers is making a bad economic outlook worse, said Matthias Siller, who focuses on emerging markets at Baring Asset Management in London, where he manages about $4bn.

If borrowers believe local interest rates are prohibitive and foreign currency lending dries up, it means “a sharp deceleration in consumer spending,” Mr Siller said. “That will bring serious problems for the economy.”

The east has been the fastest-growing part of Europe, with Romania’s economy expanding 9.3pc in the year through June, Ukraine 6.5pc and Poland 5.8pc. The combined economy of the countries sharing the euro grew 1.4pc in the period.

Ukraine, facing financial meltdown as the hryvnia drops and prices for exports such as steel tumble, has agreed to a $16.5bn loan from the IMF while Hungary secured $26bn in loans from the IMF, the EU and the World Bank. The government forecast a 1pc economic contraction next year, the first since 1993.

The Hungarian central bank raised its benchmark interest rate by three percentage points to 11.5pc last month to defend the forint.

“Panicked customers are calling to say they’re afraid the interest on their mortgages will go up or that they won’t be able to secure mortgages,” said Nikolett Gurubi, director of lending at Otthon Centrum Belvaros, the downtown Budapest branch of a real estate agency.

“We’ve been observing a return to a good old banking rule, to lend in a currency in which people earn,” said Jan Krzysztof Bielecki, chief executive officer of Poland’s biggest lender, Bank Pekao SA.

It stopped non-zloty lending in 2003.

“Earlier, banks competed on the Swiss franc market watching only sales levels and not looking at keeping an acceptable risk level.”

The problem is a “good lesson to all of us”, Polish President Lech Kaczynski said last month at a press conference in Warsaw, where he urged Poles to stick to zloty lending.


Federal Reserve boosts rates paid to banks on reserves


November 5 2008

The Federal Reserve, still battling a severe credit crisis, announced on Wednesday it will pay a higher interest rate to commercial banks on their reserves.

The Fed said it was altering the formulas it was using both for reserves the banks are required to keep on deposit at the Fed, and on excess reserves that banks choose to leave at the Fed.

The changes will provide slightly higher returns to banks for these funds, providing a boost to their earnings.

It marked the second time in just two weeks that the central bank has altered its interest rate formula to boost the interest it will pay banks.

Under the change, the Fed said it would pay an interest rate equal to the average target for the federal funds rate over a two-week maintenance period for reserves that banks are required to keep with the Fed.

Previously, the central bank had paid a rate that was 10 basis points below the funds rate target. A basis point is one-hundredth of a percentage point.

The Fed last week cut its target for the funds rate, the interest that banks charge each other for overnight loans, to 1 percent, tying a low seen only once before in the past half-century. It marked the latest in a series of aggressive efforts to combat a severe financial crisis that is threatening to push the country into a deep recession.

For excess reserves, the Fed said it will now pay the lowest average target for the funds rate over a two-week maintenance period. Previously, the amount paid on excess reserves left at the Fed was 35 basis points below the funds rate.

In announcing the higher rates to be paid to banks, the central bank said policy-makers had “judged that these changes would help foster trading in the funds market at rates closer to the … target federal funds rate.”

Congress in the $700 billion bailout package that passed on Oct. 3 gave the Fed the power to start paying banks interest on reserves and excess reserves.


Published in: on November 6, 2008 at 6:23 am  Comments Off on Federal Reserve boosts rates paid to banks on reserves  
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Norwegian loan to Iceland confirmed

By Alex Elliott

November 3 2008

Details are emerging that the anticipated Norwegian loan to Iceland will take place.

Norwegian Foreign Minister Jonas Gahr Store is in Reykjavik at the moment on an official visit. Following a meeting with Prime Minister Geir H. Haarde today, Store confirmed that a NOK 4 billion (USD 606 million) loan will be extended to Iceland.

The loan will have a maturity of up to five years and the existing currency exchange swap agreement will be extended to the end of 2009. also quotes Norwegian media as saying Norway has offered to mediate in the dispute between Iceland and the United Kingdom over repayments of British savers and the UK government’s controversial reaction to the Iceland crisis.

The news of the Norwegian loan comes after weeks of uncertainty over who will step in to save the Icelandic economy. Despite the IMF agreeing a loan of USD 2 billion, it still has not been officially approved by the board.

The Faroe Islands were the only country to have yet firmly granted Iceland a loan. Sources in Reykjavik hope the Norwegian loan will spur on negotiations with the other Nordic countries and Russia.


Published in: on November 3, 2008 at 7:13 pm  Comments Off on Norwegian loan to Iceland confirmed  
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Under Bush Administration were you Better Off?

Probably Not

Since Bush took office, workers’ paychecks have stagnated and the cost of energy and food has gone way up—as have corporate profits.

November 1 2008

By Ellen Gibson
“Are you better off?” It’s a question the candidate of the challenging party asks during each Presidential campaign. The economy, of course, is the No. 1 issue this election, and that question has been raised in cities, suburbs, and small towns across the country. With the recent stock market meltdown and the collateral damage to 401(k) plans, many voters are indeed poorer. But in terms of real wages and the cost of consumer goods, are we truly worse off? For most Americans, the answer is, sadly, yes.

On Jan. 22, 2001, when President George W. Bush took over the White House, the Nasdaq was in the midst of a post-dot-com freefall. Bush had the bad luck of taking office just before the economy went into a recession that March. But after a mini downturn, the American economy experienced a period of recovery and expansion, with the gross domestic product growing at a steady clip and productivity surging 22%. That measure of prosperity, however, hasn’t translated into gains for most families.

In 2000 the median U.S. household income was $50,557 (adjusted for inflation), according to the U.S. Census Bureau. Seven years later, the median income fell to $50,233. “That might not sound too bad,” says Edward Wolff, professor of economics at New York University, “but normally, median income increases. That’s not good news for the middle class.” Consider that the median household income would be almost $64,000 had paychecks kept pace with the GDP.
Overblown Claims?
While workers’ paychecks have stagnated, corporate profits jumped an average of 10.8% per year, according to data from the Bureau of Economic Analysis. “The fact that middle-income households ended up below where they were in 2000 despite strong productivity growth—that’s the heart of the problem,” says Jared Bernstein, an economist at the Economic Policy Institute, a liberal think tank. “It’s one thing if you’re looking at a period like now, when the macroeconomy is dysfunctional, but for most of this decade the economy has been pumping along.” However, economists at the conservative American Enterprise Institute counter that claims of income stagnation are overblown, pointing out, for example, that household income data does not take into account total compensation, including companies’ burgeoning contributions to employee health insurance.

Even though inflation has not been severe for most of the decade, the cost of living has outpaced wages. The consumer price index has risen by 25% since January 2001, while core inflation jumped 18%. But the core consumer price index can be deceptive because it excludes food and energy. Once, after reporting that core inflation had been relatively tame that quarter, Conference Board economist Ken Goldstein came back to the office to find an irate e-mail: “Hey, dummy, what the hell do you think we spend our money on?” The point was taken: When energy and food skyrocket, families feel it.

And skyrocket they have. In early 2001 you could fill your car with regular gas for $1.47 a gallon. But on Oct. 24, three months after regular unleaded peaked at $4.11 a gallon, the average cost was leveling off around $2.78, according to the AAA online Daily Fuel Gauge Report. Grocery store sticker shock has been almost as acute. Take, for example, the price of a dozen eggs, which has risen 97% since 2001, from a nationwide average of $1.01 to $1.99. “You could look at inflation and think it hasn’t been that much of a problem, but in fact, if you look at the components of the middle-income consumption basket—tuition, housing, childcare, gas, food—all of those have been rising a lot more quickly,” says Bernstein.
Retirees Are Really Feeling It
There are consumer goods that have come down in price. And some economists don’t buy the argument that families are being hit where it hurts most. “People are more attuned to price increases than declines, so their perceptions are biased,” says Wolff. He points out that the price of goods such as toys and clothing have remained fairly stable because we have benefited from inexpensive imports. Electronics have come down, too, especially when adjusted for advances in technology. In 2001 the base model of Apple’s iBook, with its paltry 500MHz chip and 10GB hard drive, sold for $1,499. Today, the basic white 13-inch MacBook laptop will run you $999 for a 2.1 GHz chip and 120GB drive. That’s $500 less for nearly four times the speed and 12 times the storage capacity.

For consumers, there’s no argument over the impact of the current economic crisis. They’re feeling it, especially retirees. Take Patricia Wehrs, a Washington State resident who retired from her federal government job in 2000. She and her husband were all set for a comfortable, though modest, retirement. Then their retirement fund started losing money every month, while the cost of living crept up. “Our basic bills—electric, telephone, water, and cable—went up, in some cases 90%, over the past two years. I’ve kept the food bills under control with a budget and a diet,” jokes Wehrs. “However, fuel costs have drained any extra money, so no more theater, no dinners out, and smaller gifts to the grandchildren for special occasions.”

Bad policies and a lack thereof
November 1, 2008

Long before the credit crisis that almost buried Wall Street and forced the U.S. government to effectively nationalize a chunk of the American financial system, President George W. Bush had shown himself to be a dismal caretaker of his country’s economic and fiscal well-being.

Then the housing bubble exploded, the value of complex, mortgage-related securities plummeted and credit markets froze solid. The ensuing collapse of some of the biggest and best-known names in banking, the controversial bailouts and the serious slowdown that has reached every corner of the globe will always colour the way economic historians evaluate Mr. Bush’s presidency.

Much like President Herbert Hoover in the Great Depression, Mr. Bush’s main contribution to the crisis was his failure to recognize its dimensions until irreparable damage had been inflicted.

His administration’s belated move to flood the financial system with credit and capital and to prop up ailing institutions may well prove the correct response. But it will inevitably worsen the dire fiscal situation that will face Barack Obama or John McCain, one that Mr. Bush’s misguided policies caused in the first place.

President Bush was spending like a Texas oilman on a Las Vegas gambling spree long before emergency rebates and massive bailouts became administration policy. In eight years, a supposedly conservative president made big government considerably bigger and more intrusive, and destroyed years of hard work by the Clinton administration to balance the books. His reckless combination of heavy tax cuts – even as the costs of the Iraq war climbed into the stratosphere – and significantly higher spending has left the government so awash in red ink that his successor has little hope of resurrecting even a modest surplus and still keeping the sputtering economy from crashing. The record budget deficit of $454.8-billion (U.S.) in the latest fiscal year pales in comparison to cautious forecasts of about $750-billion for this year. A figure as high as $1.6-trillion has been kicked around.

Long-term deficits are not benign. They raise the cost of capital, restrict growth and, in normal times, undermine the currency. Panicky investors have recently flocked to the U.S. dollar as a rare safe harbour in a wide sea of uncertainty. But people will soon reassess the greenback’s long-term future, in light of the sky-high debt and severe structural problems left untouched or worsened by Mr. Bush’s policies or lack of them. The net result will be bad for the United States, and also for Canada and for the global economy, which still depend on a buoyant U.S. market. That, too, is part of the Bush legacy.

The Bush administration is not directly responsible for the current mess. Cheap credit, subprime mortgages, greedy investment bankers and opaque derivatives trading on a massive scale were already features of the landscape before Mr. Bush became president. But his strenuous efforts, along with those of Treasury Secretary Henry Paulson and Ben Bernanke, the chairman of the Federal Reserve Board, to play down the potentially devastating consequences of the bursting credit bubble inspired a dangerous level of complacency.

That brings us to the ignominious end of Mr. Bush’s economic management. But what about the beginning?

It is not hard to pinpoint where and how he went off the fiscal rails. He squeaked into office in 2000 on the promise of deep income-tax cuts, which seemed the right medicine when the Internet stock bubble was bursting and the U.S. economy was showing serious signs of stress after a long period of growth. But then came 9/11 and the enormous security and military expenditures that followed. The war in Iraq cost billions, and the peace has proved many times more expensive. The final tally will be in the trillions.

Yet, even as the U.S. economy pulled out of the doldrums, Mr. Bush stubbornly refused to abandon the low-tax, big-spend policies that were weakening public finances. What’s worse, after 9/11, he narrowed his focus dramatically, dropping ambitious plans to reform Social Security and allowing the United States to become even more dependent on foreign capital and foreign oil.

When government borrowing is rocketing skyward to pay for military adventures, that is not the time for unaffordable tax cuts, increased subsidies or a major expansion in Medicare for which there was no money.

Fortunately, Mr. Bush never proceeded with his idea to have Americans take responsibility for managing their own assets set aside for retirement. Had he succeeded in pushing through this privatization, the cost to the public purse could have been as high as $2-trillion. And the damage to Americans’ pension prospects after the credit meltdown and stock market plunge would have been incalculable.

But that does not mean the U.S. social safety net should have been left to slowly unravel. His successor is now saddled with that problem, as well as a raft of other costly domestic issues ignored or mismanaged by the current administration. Raising the necessary capital may well require scaling back the “temporary” Bush income-tax cuts, which are due to expire by 2010, imposing a national sales tax along the lines of the GST and even a gasoline tax. None would be popular. But there may be little choice.

Any Canadian leader who left people so vulnerable to future financial risk would have been run out of politics after a single term, regardless of the shape of the economy.

For three-quarters of Mr. Bush’s time in office, the U.S. economy was quite robust, which only underlines the poverty of his policies. Instead of taking advantage of the windfall revenues to cap the rising deficit, pay down debt, repair crumbling infrastructure and reduce dependence on Middle Eastern oil, he earmarked large expenditures to cover the spiralling costs of his domestic security agenda and the disastrous war. He also proffered more tax breaks and higher subsidies to favoured industries, including oil and agriculture, which saw its trade-distorting federal handouts double between 2002 and 2005.

It was an opportunity squandered, and it will haunt U.S. policy-makers for years to come.

Today, the steady drumbeat of economic success is a distant memory. President Bush is not to blame for that. But the most profligate leader in U.S. history certainly bears a large share of responsibility for the dangerous holes in the leaky ship of state left for his successor to patch.


Then there is the 11 trillion dollar debt he has run up.

Of course we also must remember the wars he has started as well.

Lest we forget

A chronology of how the Bush Administration repeatedly and deliberately refused to listen to intelligence agencies that said its case for war was weak

January 29, 2004

Former weapons inspector David Kay now says Iraq probably did not have WMD before the war, a major blow to the Bush Administration which used the WMD argument as the rationale for war. Unfortunately, Kay and the Administration are now attempting to shift the blame for misleading America onto the intelligence community. But a review of the facts shows the intelligence community repeatedly warned the Bush Administration about the weakness of its case, but was circumvented, overruled, and ignored. The following is year-by-year timeline of those warnings.

In 2001 and before, intelligence agencies noted that Saddam Hussein was effectively contained after the Gulf War. In fact, former weapons inspector David Kay now admits that the previous policy of containment – including the 1998 bombing of Iraq – destroyed any remaining infrastructure of potential WMD programs.

OCTOBER 8, 1997 – IAEA SAYS IRAQ FREE OF NUCLEAR WEAPONS: “As reported in detail in the progress report dated 8 October 1997�?and based on all credible information available to date, the IAEA’s verification activities in Iraq, have resulted in the evolution of a technically coherent picture of Iraq’s clandestine nuclear programme. These verification activities have revealed no indications that Iraq had achieved its programme objective of producing nuclear weapons or that Iraq had produced more than a few grams of weapon-usable nuclear material or had clandestinely acquired such material. Furthermore, there are no indications that there remains in Iraq any physical capability for t he production of weapon-usable nuclear material of any practical significance.” [Source: IAEA Report, 10/8/98]

FEBRUARY 23 & 24, 2001 – COLIN POWELL SAYS IRAQ IS CONTAINED: “I think we ought to declare [the containment policy] a success. We have kept him contained, kept him in his box.” He added Saddam “is unable to project conventional power against his neighbors” and that “he threatens not the United States.” [Source: State Department, 2/23/01 and 2/24/01]

SEPTEMBER 16, 2001 – CHENEY ACKNOWLEDGES IRAQ IS CONTAINED: Vice President Dick Cheney said that “Saddam Hussein is bottled up” – a confirmation of the intelligence he had received. [Source: Meet the Press, 9/16/2001]

SEPTEMBER 2001 – WHITE HOUSE CREATES OFFICE TO CIRCUMVENT INTEL AGENCIES: The Pentagon creates the Office of Special Plans “in order to find evidence of what Wolfowitz and his boss, Defense Secretary Donald Rumsfeld, believed to be true-that Saddam Hussein had close ties to Al Qaeda, and that Iraq had an enormous arsenal of chemical, biological, and possibly even nuclear weapons that threatened the region and, potentially, the United States�?The rising influence of the Office of Special Plans was accompanied by a decline in the influence of the c=I.A. and the D.I.A. bringing about a crucial change of direction in the American intelligence community.” The office, hand-picked by the Administration, specifically “cherry-picked intelligence that supported its pre-existing position and ignoring all the rest” while officials deliberately “bypassed the government’s customary procedures for vetting intelligence.” [Sources: New Yorker, 5/12/03; Atlantic Monthly, 1/04; New Yorker, 10/20/03]

Throughout 2002, the CIA, DIA, Department of Energy and United Nations all warned the Bush Administration that its selective use of intelligence was painting a weak WMD case. Those warnings were repeatedly ignored.

JANUARY, 2002 – TENET DOES NOT MENTION IRAQ IN NUCLEAR THREAT REPORT: “In CIA Director George Tenet’s January 2002 review of global weapons-technology proliferation, he did not even mention a nuclear threat from Iraq, though he did warn of one from North Korea.” [Source: The New Republic, 6/30/03]

FEBRUARY 6, 2002 – CIA SAYS IRAQ HAS NOT PROVIDED WMD TO TERRORISTS: “The Central Intelligence Agency has no evidence that Iraq has engaged in terrorist operations against the United States in nearly a decade, and the agency is also convinced that President Saddam Hussein has not provided chemical or biological weapons to Al Qaeda or related terrorist groups, according to several American intelligence officials.” [Source: NY Times, 2/6/02]

APRIL 15, 2002 – WOLFOWITZ ANGERED AT CIA FOR NOT UNDERMINING U.N. REPORT: After receiving a CIA report that concluded that Hans Blix had conducted inspections of Iraq’s declared nuclear power plants “fully within the parameters he could operate” when Blix was head of the international agency responsible for these inspections prior to the Gulf War, a report indicated that “Wolfowitz ‘hit the ceiling’ because the CIA failed to provide sufficient ammunition to undermine Blix and, by association, the new U.N. weapons inspection program.” [Source: W. Post, 4/15/02]

SUMMER, 2002 – CIA WARNINGS TO WHITE HOUSE EXPOSED: “In the late summer of 2002, Sen. Graham had requested from Tenet an analysis of the Iraqi threat. According to knowledgeable sources, he received a 25-page classified response reflecting the balanced view that had prevailed earlier among the intelligence agencies–noting, for example, that evidence of an Iraqi nuclear program or a link to Al Qaeda was inconclusive. Early that September, the committee also received the DIA’s classified analysis, which reflected the same cautious assessments. But committee members became worried when, midway through the month, they received a new CIA analysis of the threat that highlighted the Bush administration’s claims and consigned skepticism to footnotes.” [Source: The New Republic, 6/30/03]

SEPTEMBER, 2002 – DIA TELLS WHITE HOUSE NO EVIDENCE OF CHEMICAL WEAPONS: “An unclassified excerpt of a 2002 Defense Intelligence Agency study on Iraq’s chemical warfare program in which it stated that there is ‘no reliable information on whether Iraq is producing and stockpiling chemical weapons, or where Iraq has – or will – establish its chemical warfare agent production facilities.’” The report also said, “A substantial amount of Iraq’s chemical warfare agents, precursors, munitions, and production equipment were destroyed between 1991 and 1998 as a result of Operation Desert Storm and UNSCOM (United Nations Special Commission) actions.” [Source: Carnegie Endowment for Peace, 6/13/03; DIA report, 2002]

SEPTEMBER 20, 2002 – DEPT. OF ENERGY TELLS WHITE HOUSE OF NUKE DOUBTS: “Doubts about the quality of some of the evidence that the United States is using to make its case that Iraq is trying to build a nuclear bomb emerged Thursday. While National Security Adviser Condi Rice stated on 9/8 that imported aluminum tubes ‘are only really suited for nuclear weapons programs, centrifuge programs’ a growing number of experts say that the administration has not presented convincing evidence that the tubes were intended for use in uranium enrichment rather than for artillery rocket tubes or other uses. Former U.N. weapons inspector David Albright said he found significant disagreement among scientists within the Department of Energy and other agencies about the certainty of the evidence.” [Source: UPI, 9/20/02]

OCTOBER 2002 – CIA DIRECTLY WARNS WHITE HOUSE: “The CIA sent two memos to the White House in October voicing strong doubts about a claim President Bush made three months later in the State of the Union address that Iraq was trying to buy nuclear materials in Africa.” [Source: Washington Post, 7/23/03]

OCTOBER 2002 — STATE DEPT. WARNS WHITE HOUSE ON NUKE CHARGES: The State Department’s Intelligence and Research Department dissented from the conclusion in the National Intelligence Estimate on Iraq’s WMD capabilities that Iraq was reconstituting its nuclear weapons program. “The activities we have detected do not … add up to a compelling case that Iraq is currently pursuing what INR would consider to be an integrated and comprehensive approach to acquiring nuclear weapons.” INR accepted the judgment by Energy Department technical experts that aluminum tubes Iraq was seeking to acquire, which was the central basis for the conclusion that Iraq was reconstituting its nuclear weapons program, were ill-suited to build centrifuges for enriching uranium. [Source, Declassified Iraq NIE released 7/2003]

OCTOBER 2002 – AIR FORCE WARNS WHITE HOUSE: “The government organization most knowledgeable about the United States’ UAV program — the Air Force’s National Air and Space Intelligence Center — had sharply disputed the notion that Iraq’s UAVs were being designed as attack weapons” – a WMD claim President Bush used in his October 7 speech on Iraqi WMD, just three days before the congressional vote authorizing the president to use force. [Source: Washington Post, 9/26/03]

Instead of listening to the repeated warnings from the intelligence community, intelligence officials say the White House instead pressured them to conform their reports to fit a pre-determined policy. Meanwhile, more evidence from international institutions poured in that the White House’s claims were not well-grounded.

LATE 2002-EARLY 2003 – CHENEY PRESSURES CIA TO CHANGE INTELLIGENCE: “Vice President Dick Cheney’s repeated trips to CIA headquarters in the run-up to the war for unusual, face-to-face sessions with intelligence analysts poring over Iraqi data. The pressure on the intelligence community to document the administration’s claims that the Iraqi regime had ties to al-Qaida and was pursuing a nuclear weapons capacity was ‘unremitting,’ said former CIA counterterrorism chief Vince Cannistraro, echoing several other intelligence veterans interviewed.” Additionally, CIA officials “charged that the hard-liners in the Defense Department and vice president’s office had ‘pressured’ agency analysts to paint a dire picture of Saddam’s capabilities and intentions.” [Sources: Dallas Morning News, 7/28/03; Newsweek, 7/28/03]

JANUARY, 2003 – STATE DEPT. INTEL BUREAU REITERATE WARNING TO POWELL: “The Bureau of Intelligence and Research (INR), the State Department’s in-house analysis unit, and nuclear experts at the Department of Energy are understood to have explicitly warned Secretary of State Colin Powell during the preparation of his speech that the evidence was questionable. The Bureau reiterated to Mr. Powell during the preparation of his February speech that its analysts were not persuaded that the aluminum tubes the Administration was citing could be used in centrifuges to enrich uranium.” [Source: Financial Times, 7/30/03]

FEBRUARY 14, 2003 – UN WARNS WHITE HOUSE THAT NO WMD HAVE BEEN FOUND: “In their third progress report since U.N. Security Council Resolution 1441 was passed in November, inspectors told the council they had not found any weapons of mass destruction.” Weapons inspector Hans Blix told the U.N. Security Council they had been unable to find any WMD in Iraq and that more time was needed for inspections. [Source: CNN, 2/14/03]

FEBRUARY 15, 2003 – IAEA WARNS WHITE HOUSE NO NUCLEAR EVIDENCE: The head of the IAEA told the U.N. in February that “We have to date found no evidence of ongoing prohibited nuclear or nuclear-related activities in Iraq.” The IAEA examined “2,000 pages of documents seized Jan. 16 from an Iraqi scientist’s home — evidence, the Americans said, that the Iraqi regime was hiding government documents in private homes. The documents, including some marked classified, appear to be the scientist’s personal files.” However, “the documents, which contained information about the use of laser technology to enrich uranium, refer to activities and sites known to the IAEA and do not change the agency’s conclusions about Iraq’s laser enrichment program.” [Source: Wash. Post, 2/15/03]

FEBURARY 24, 2003 – CIA WARNS WHITE HOUSE ‘NO DIRECT EVIDENCE’ OF WMD: “A CIA report on proliferation released this week says the intelligence community has no ‘direct evidence’ that Iraq has succeeded in reconstituting its biological, chemical, nuclear or long-range missile programs in the two years since U.N. weapons inspectors left and U.S. planes bombed Iraqi facilities. ‘We do not have any direct evidence that Iraq has used the period since Desert Fox to reconstitute its Weapons of Mass Destruction programs,’ said the agency in its semi-annual report on proliferation activities.” [NBC News, 2/24/03]

MARCH 7, 2003 – IAEA REITERATES TO WHITE HOUSE NO EVIDENCE OF NUKES: IAEA Director Mohamed ElBaradei said nuclear experts have found “no indication” that Iraq has tried to import high-strength aluminum tubes or specialized ring magnets for centrifuge enrichment of uranium. For months, American officials had “cited Iraq’s importation of these tubes as evidence that Mr. Hussein’s scientists have been seeking to develop a nuclear capability.” ElBaradei also noted said “the IAEA has concluded, with the concurrence of outside experts, that documents which formed the basis for the [President Bush’s assertion] of recent uranium transactions between Iraq and Niger are in fact not authentic.” When questioned about this on Meet the Press, Vice President Dick Cheney simply said “Mr. ElBaradei is, frankly, wrong.” [Source: NY Times, 3/7/03: Meet the Press, 3/16/03]

MAY 30, 2003 – INTEL PROFESSIONALS ADMIT THEY WERE PRESSURED: “A growing number of U.S. national security professionals are accusing the Bush administration of slanting the facts and hijacking the $30 billion intelligence apparatus to justify its rush to war in Iraq . A key target is a four-person Pentagon team that reviewed material gathered by other intelligence outfits for any missed bits that might have tied Iraqi President Saddam Hussein to banned weapons or terrorist groups. This team, self-mockingly called the Cabal, ‘cherry-picked the intelligence stream’ in a bid to portray Iraq as an imminent threat, said Patrick Lang, a official at the Defense Intelligence Agency (DIA). The DIA was “exploited and abused and bypassed in the process of making the case for war in Iraq based on the presence of WMD,” or weapons of mass destruction, he said. Greg Thielmann, an intelligence official in the State Department, said it appeared to him that intelligence had been shaped ‘from the top down.'” [Reuters, 5/30/03 ]

JUNE 6, 2003 – INTELLIGENCE HISTORIAN SAYS INTEL WAS HYPED: “The CIA bowed to Bush administration pressure to hype the threat of Saddam Hussein’s weapons programs ahead of the U.S.-led war in Iraq , a leading national security historian concluded in a detailed study of the spy agency’s public pronouncements.” [Reuters, 6/6/03]


Published in: on November 2, 2008 at 2:37 am  Comments Off on Under Bush Administration were you Better Off?  
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Prime Minister’s plea on oil prices as he tours the Middle East to secure IMF funding

By Nigel Morris

November 1 2008

Gordon Brown flies out to the Gulf today on a mission to persuade the region’s oil-rich states to help combat the global economic meltdown.

He is expected to meet the leaders of Qatar, Saudi Arabia and the United Arab Emirates and ask them to pump billions of pounds into the International Monetary Fund (IMF), which is struggling to cope with pleas for help from countries facing collapse in their financial system.

The Prime Minister will also urge them not to cut production in an effort to reverse the slide in oil prices over the past month. The size of the challenge facing the British economy was underlined on the eve of the tour, as Mr Brown was warned that levels of debt and borrowing will climb higher than during the last recession in the early 1990s.

A report by the independent Institute for Fiscal Studies concluded that the Government was going into the recession with a “significantly higher” level of debt than in 1990. Even excluding the cost of nationalising Northern Rock, public sector net debt is due to reach 39.7 per cent of gross domestic product this year and is “very likely” to rise above 46.2 per cent within the next couple of years.

The Prime Minister has sought to emphasise the “global” nature of the economic downturn. Ahead of his latest trip abroad he signalled fears that the $250bn (£155bn) fund available to the IMF to help fragile economies might not be enough to cope with the extent of global downturn. Hungary, Iceland and Ukraine have already agreed emergency loans, while other countries queuing up for help include Belarus, Turkey and – critically for regional security – Pakistan.

Mr Brown believes the IMF’s coffers should be topped up by the rapidly-growing economies of the Gulf region, whose revenues have soared as fuel prices leapt this year. He is also targeting China, which is sitting on large reserves of capital.

The extra cash required by the IMF to counter the international turbulence could amount to hundreds of billions of dollars. But Mr Brown will probably run into opposition in the region, whose leaders have already expressed dismay that they are being asked to tackle a problem that has its roots in the turmoil in the American sub-prime mortgage market.

The Prime Minister will also express his opposition to the decision of the Organisation of the Petroleum Exporting Countries to cut output from today by 1.5 million barrels a day.

The Gulf nations, which produce more than half of the world’s oil, have seen the price of a barrel fall from a high of $147 (£91) in July to below $65 yesterday. The Prime Minister’s spokesman said yesterday: “We recognise over that over the long-term global demand for oil is increasing, so over the long-term price is likely to increase. But what we want to avoid is the sharp increases we have seen in recent months.” Mr Brown is also planning to renew his call on the Gulf states to invest in renewable energy technology.

He is being accompanied by Peter Mandelson, the Business Secretary, and Ed Miliband, the Energy and Climate Change Secretary, and more than 20 business leaders.

During a visit to Edinburgh yesterday, Mr Brown said low interest rates and falling inflation, along with lower national debt than other countries, would help Britain survive the turbulence. “It is the first global crisis that we are having to deal with in this new industrial age where so much is global. I am confident that the opportunities for our economy are great in the years to come.”

The shadow Chancellor, George Osborne, yesterday accused the Prime Minister of trying to “spend his way out of recession” at the risk of exacerbating the downturn and saddling future generations with huge tax increases to combat rising national debt.

In a speech drawing dividing lines between Conservative and Labour approaches to the economic crisis, he denounced Mr Brown as irresponsible for suggesting that the Government can “borrow without limit” to stave off recession.

He said the policy of borrowing more to pay for a state “spending splurge” was “a cruise missile aimed at the heart of the economy”, which could require tax rises equivalent to 4p on income tax. But he was attacked by Labour and Liberal Democrat opponents for being “confused” and “out of his depth” in his analysis.

The credit crisis: Latest developments

*PM to urge Gulf states not to cut oil production as Opec reduces output by 1.5 million barrels a day

*Osborne accuses Brown of trying to ‘spend his way out of a recession’

*Barclays to take £7.3bn from investors in Abu Dhabi and Qatar in bid to maintain bonus packages

*Investors in the Middle East could end up owning as much as one-third of banking giant’s shares


Published in: on November 1, 2008 at 4:03 pm  Comments Off on Prime Minister’s plea on oil prices as he tours the Middle East to secure IMF funding  
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Sommet de la Francophonie in Canada

Harper welcomes Sarkozy ahead of talks on economy

Oct. 17 2008

Prime Minister Stephen Harper welcomed French President Nicolas Sarkozy in Quebec City Friday ahead of a working lunch where the leaders will discuss the economy and trade issues.

Sarkozy and Jose Manuel Barroso, the president of the European Commission, landed in Quebec City Friday morning and were greeted by Harper on the tarmac.

Harper has vowed to make sure Canadian banks are not negatively impacted by ongoing rescue efforts in Europe and the U.S., where governments are providing aid to financial institutions.

“The French president is the chairman of the EU commission on this whole issue right now so he’s trying to drum up support for different ideas on how to protect banks and the financial sector internationally,” CTV’s Rosemary Thompson said Friday from Quebec City.

The leaders are also expected to discuss a possible free trade deal between Canada and the EU.

“Obviously, the United States has always been our main trading partner but if we can do more with India, China and Asia and if we can do more with the European Union that would help to diversify the Canadian economy,” Environment Minister John Baird told CTV’s Canada AM on Friday.

According to The Globe and Mail, the discussions will focus on the free trade of services, rather than manufactured goods and agriculture, between Canada and France.

The Globe cites a French-language draft version of a joint-statement that says both countries are ready to take steps this year to ensure “operational launch of negotiations as soon as possible in 2009.”

The plan may include an “open skies” agreement for airlines, which would allow airlines from either country to have expanded rights to fly routes in the other’s jurisdiction, says The Globe.

Thompson said a labour mobility agreement between France and Quebec may also be negotiated today.

As part of the deal, Quebec and France would recognize 12 different trades and professions.

“For instance, if you were a doctor in France you could come and work in Quebec as a doctor and there wouldn’t be a hassle over credentials,” Thompson told CTV Newsnet from Quebec City.

After his meeting with Harper, Sarkozy will then deliver an address to the National Assembly in Quebec at 3 p.m.

“Apparently he’s going to take a very balanced approach today saying that he loves Canada but that, of course, Quebec is like a brother to France,” Thompson said.

In the evening, Sarkozy will attend the official opening of the summit of La Francophonie, an organization of 55 French-speaking nations.

However, the French leader has cut short his visit and will not attend the closing ceremonies of the summit — a first for any French president.

Instead, Sarkozy will travel to Camp David in Maryland on Saturday for meetings with U.S. President George Bush.

“It’s a bit disappointing,” Christine St-Pierre, Quebec’s minister responsible for the provincial language law, said Thursday.

Quebec Premier Jean Charest said the shortened visit was understandable given the “extraordinary circumstances.”

Sarkozy’s wife, Carla Bruni-Sarkozy, will not be travelling with her husband.


CTV Newsnet: Leaders speak to media in Quebec  document.write(format_clip_duration(’00:15:12.00′)); // see common.js 15:12
CTV Montreal: John Grant reports from Quebec City and discusses Sarkozy’s plan to reform capitalism  document.write(format_clip_duration(’00:02:36.00′)); // see common.js 2:36
CTV Newsnet: Rosemary Thompson on the discussions expected at the Summit  document.write(format_clip_duration(’00:03:07.00′)); // see common.js 3:07
CTV Newsnet: Prime Minister Stephen Harper meets French President Nicolas Sarkozy in Quebec City  document.write(format_clip_duration(’00:03:52.00′)); // see common.js 3:52

New State-Run Glitnir Bank Established

A new Glitnir, Nýr Glitnir banki hf., has been formally established as announced by the Financial Supervisory Authority (FME) yesterday. The new bank will take over Glitnir’s domestic assets to secure regular banking operations and the safety of deposits in Iceland.

The new bank will not be involved in Glitnir Bank’s international operations, reports, but all branches in Iceland, service centers and online banks are open.

The new Glitnir has ISK 110 billion (USD 1.0 billion, EUR 0.7 billion) in equity as submitted by the state. The size of the balance sheet is ISK 1,200 billion (USD 10.9 billion, EUR 8.0 billion).

Birna Einarsdóttir is the new director of the bank. A woman has also been hired as the new director of Landsbanki and the Financial Times commented that women were now responsible for tidying up the mess created by their male colleagues.

Ninety-seven employees of Glitnir Bank were given notice yesterday. Around 500 people have lost their jobs in total at Glitnir and Landsbanki, which were nationalized last week. Earlier reports stated that 500 people at Landsbanki alone would lose their jobs.

Einarsdóttir told RÚV that the salaries of many of Glitnir’s remaining employees, including herself, will be reduced.

It is still unclear how many employees of Kaupthing Bank, which was also taken over by the state last week, will be left unemployed.


Published in: on October 16, 2008 at 7:48 pm  Comments Off on New State-Run Glitnir Bank Established  
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Iceland’s Kaupthing Prepares Lawsuit against Britain

October 16 2008

Representatives of Iceland’s largest bank, Kaupthing, are preparing a lawsuit against British authorities because of the harsh measures the UK took last week—seizing Kaupthing’s assets in the UK—which, Kaupthing claims, drove the bank into bankruptcy.

Kaupthing Bank will demand ISK 100 billion (USD 1.0 billion, EUR 0.7 billion, GBP 0.5 billion) in compensation, RÚV reports.

A group of lawyers from an international law firm are currently in Iceland working with Kaupthing Bank’s representatives to prepare the bank’s case against the British authorities. One of these lawyers is John Jarvis, a highly-respected lawyer in the UK.

“I think it’s safe to say we have formed some initial views. We are surprised that the order that was made, was made pursuant to an act which is commonly known now as the Northern Rock Act 2008,” Jarvis said in an interview with RÚV.

“It seems to be, to us at the moment, outside the purpose of that act that the order was made and there is a possible remedy there for a gain to the English court to have that order declared unlawful,” Jarvis continued.

“We are also looking to see whether there are the civil remedies for damages for such torts under English law as misfeasance in public office and negligence,” Jarvis concluded.

The team of lawyers is hopeful that Kaupthing Bank can win the case. “One can see from the use of the anti-terrorist legislation by the British government against Landsbanki that there was a degree of desperation in their actions last week,” said lawyer Richard Beresford.

“And certainly the language of the British government in relation to Icelandic banks was unfortunate and perhaps betrayed something underneath which was more than one would have thought should be proper behavior by the British government towards one of the major financial institutes in the UK,” Beresford added.

Click here to watch the news item on RÚV and listen to the interviews with Jarvis and Beresford (only available for two weeks from this date) and here to read about a potential lawsuit by Icelandic authorities against the British government.


Published in: on October 16, 2008 at 7:39 pm  Comments Off on Iceland’s Kaupthing Prepares Lawsuit against Britain  
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Devil Is in Bailout’s Details

OCTOBER 15, 2008

WASHINGTON — Upending the government’s relationship with the financial sector, the Bush administration outlined a plan Tuesday to prop up banks by injecting $250 billion into U.S. financial institutions, including nine of the nation’s largest banks, and to guarantee new debt issues and deposit accounts used by businesses.

The sweeping steps create a thicket of issues, most pressingly whether the banks will step up lending. The government is making clear it expects banks to lend out the funds it gets from Uncle Sam. Further exercising its clout, Treasury also extracted a promise that the financial firms would help struggling homeowners, continue lending and would sign up for loan guarantees offered by the Federal Deposit Insurance Corp.

[FDIC Chairperson Sheila Bair ] Reuters

FDIC Chairperson Sheila Bair speaks at a news conference as U.S. Treasury Secretary Henry Paulson (center) and Federal Reserve Chairman Ben Bernanke (right) look on.

“What we’re doing is making clear to the banks how important it is to deploy the capital,” Treasury Secretary Henry Paulson said in an interview.

Analysts, investors and some bankers applauded the government rescue. They said it would help rebuild confidence in the industry and could set the stage for a wave of consolidation in which stronger companies take over their weaker rivals.

Officials with some of the giant banks, whose CEOs were briefed Monday on the government’s plan, said they don’t expect that the government’s new role as a major shareholder will subject them to additional regulatory restrictions. They noted that top banks already face rigorous scrutiny, with bank regulators permanently stationed at their headquarters.

“Believe me, they have plenty of influence already,” said a top executive at a major New York bank, brushing off questions about whether his company will see tougher supervision.

[Kenneth Lewis]

Kenneth Lewis

Bank of America Corp. Chairman and Chief Executive Officer Kenneth Lewis was supportive of the new plan, while acknowledging that some conditions for the government help were not ideal. “Our interest is in anything that helps the system operate more normally at this point,” said Bank of America spokesman Robert Stickler. As for the possibility of government interference, “Who knows?” he said. “We are in unchartered territory.”

Edward J. Wehmer, chief executive of Wintrust Financial Corp., a bank-holding company in Lake Forest, Ill., said the government financing is likely to attract smaller banks that haven’t been able to raise new capital at reasonable prices. “The market was becoming very predatory with the private-equity guys,” Mr. Wehmer said. “You basically had to sell your soul.”

The Treasury Department said it intended to remain a passive investor in the financial institutions that get government cash. But its tentacles will influence aspects of how banks do business, by placing restrictions on dividend payments, executive compensation and the types of private investments that banks can receive.

WSJ’s Damian Paletta parses the latest moves by the Treasury Department, the Fed and the FDIC to help revive the banking sector and fight the global credit crunch. (Oct. 14)

In somber remarks in the Treasury Department’s ornate Cash Room, Mr. Paulson said the government’s latest moves were necessary given the deep financial crisis.

While he had been reluctant to take such steps, his actions Tuesday, coupled with the administration’s moves over the past six months, have injected the government more deeply into the financial sector than at any time since the 1930s. Mr. Paulson and other regulators said the steps were temporary.

But, historically, it’s often hard to undo new rules in Washington after businesses, consumers and policy makers adjust to changes.

Mr. Paulson said the government was not seeking an active role in the companies where it invests. “We’re not looking to come in and take meaningful ownership percentages,” he said. “We’re looking to put in place a very good private-sector money manager to manage these equities to be sold.”

At the core of Tuesday’s announcement is a plan to buy $250 billion of preferred stock in banks, a step the government sees as crucial to getting banks to make new loans and to lure private capital from the sidelines.

While the program is voluntary, Treasury essentially forced nine major U.S. banks to agree to take $125 billion from the federal government. Treasury will buy $25 billion in preferred stock from Bank of America — including soon-to-be acquired Merrill Lynch — as well as from J.P. Morgan and Citigroup; $25 billion from Wells Fargo & Co.; $10 billion from Goldman Sachs Group Inc. and Morgan Stanley; $3 billion from Bank of New York Mellon; and about $2 billion from State Street. The remainder will be available to small and medium-size institutions that apply for an investment.

The money will come from the $700 billion that Congress recently approved for Treasury to buy bad loans and other troubled assets from financial institutions. Treasury still intends to proceed with that program within the next few weeks. On Tuesday, President George W. Bush said he granted authority for Mr. Paulson to get access to an additional $100 billion to buy troubled assets, bringing the total commitment so far to $350 billion. Another $350 billion is available, although Congress can vote to deny the funds.

The government’s preferred stock will pay a 5% dividend for the first five years and then convert to 9%. Firms will not be able to increase their dividends for three years while the Treasury is an investor and cannot get rid of the investment for three years unless they raise high-quality private capital. Firms must also get Treasury’s consent to buy back their own stock.

[Image] Reuters

Paulson and Bernanke

Treasury also has the right to buy common stock equal to 15% of its total investment in the firm. Treasury can convert these so-called warrants to buy stock, which would give it a bigger stake in the company and dilute existing shareholders. It can also sell the warrants, which could make Treasury money if the stock price goes up.

The decision whether to convert the shares into common stock or sell the warrants will be made by the Treasury secretary. It is expected to be based on the health of the financial institution and what’s in the best interest of taxpayers, according to people familiar with the matter.

Banks will also face restrictions on what they can pay senior executives as long as Treasury is an investor. Companies can’t structure compensation programs that “encourage unnecessary and excessive risks” and must prohibit so-called golden-parachute payments to senior executives. Firms also are limited to $500,000 in executive-compensation tax deductions for each senior executive. They will also be restricted in the type of stock they can issue to private investors — no investment will be allowed to be senior to Treasury’s preferred stake.

The plan includes a move by the FDIC to temporarily offer banks unlimited deposit insurance for non-interest-bearing bank accounts, which are typically used by small businesses. A spate of bank failures and the market turmoil have raised anxiety levels for many account holders who could cause greater concerns for banks if they start to pull accounts from otherwise healthy institutions.

The FDIC also will guarantee, for three years and for a fee, the new senior unsecured debt issued by a wide range of banks, thrifts and financial holding companies through June 30.

The FDIC’s guarantees should ease anxiety about institutions’ creditworthiness, analysts said. The agency’s backing of deposits above the current $250,000 limit in non-interest-bearing checking accounts is intended to stem the tide of business owners yanking their money out of troubled financial institutions.

The Federal Reserve said Tuesday it would open a program on Oct. 27 to fund purchases of commercial paper — a form of short-term corporate borrowing — with three-month maturities. The commercial-paper market has come under intense pressure in recent weeks, constraining businesses and consumers from receiving credit.

The extent of government involvement in the banking sector now exceeds the role played by the U.S. during the savings-and-loan crisis in the late 1980s. Some in the banking industry say they are unsure what the new relationship will bring.

“Will the government be looking over my shoulder and second-guessing my lending policies and compensation policies?” said American Bankers Association President Edward Yingling. Most banks are well capitalized, he said, and do not need new cash infusions.

Wells Fargo & Co. Chairman Richard Kovacevich, who attended Monday’s meeting at the Treasury, expressed reservations about the plan, insisting that his company wasn’t in need of government funding, according to a person briefed on the meeting. “In general we believe the Treasury’s plan is a positive step,” San Francisco-based Wells Fargo said in a statement.

Ron Hermance, president of Hudson City Bancorp Inc., Paramus, N.J., said he stayed away from subprime mortgages during the housing boom and stuck to “dull and boring” lending that now supported the $51 billion bank. He said he worried the U.S. is propping up banks that would fail on their own, or may fail even with a new infusion of public money. Treasury says its program is aimed at healthy banks and that it has separate authority, under legislation approved by Congress, to help ailing financial institutions.

With many banks crippled by billions of dollars in losses on exotic loans and securities, and no longer able to sell their troubled assets, institutions have gone back to basics. They are now concentrating on making loans that are of high enough quality that they can reside on the banks’ books for years.

Some experts predicted that having the government as a major shareholder would spur banks to stop engaging in some risky behavior.

Comptroller of the Currency John Dugan, one of the nation’s top bank regulators, said the moves were necessary “because we did a number of very substantial, ‘one-off’ things, and they weren’t having a lasting effect.”

A key question is which midsize banks will be able to obtain the government funds. Treasury officials said Tuesday that the program is intended for “healthy” banks, but they didn’t clearly define what that means.

The government’s capital infusions could provide some struggling lenders with a bit of breathing room. In recent months, lenders like BankUnited Financial Corp. and Downey Financial Corp. have tried in vain to line up new capital, despite heavy pressure from regulators.

Dozens of regional banks have mountains of bad loans that are likely to keep growing at least until 2010, say bankers, analysts and investors. In a report Tuesday, analysts at Sanford C. Bernstein & Co. forecast that, in terms of loan losses, “2009 will rank as the weakest year since the Great Depression.”

[u.s. plan]

During the Depression, the Reconstruction Finance Corp. bought billions of dollars of preferred stock that came with voting rights. The government then barred banks from paying dividends until they had bought out the government’s stakes. This time, the government stakes are nonvoting and the dividend restrictions are less onerous.

“It looks like a pretty good deal for the recipients and probably a pretty tough deal for taxpayers,” said John Kanas, who was CEO of North Fork Bancorp until selling it to Capital One Financial Corp. in 2006. “It seems quite explicit that there’s no strings attached to this money…It seems like a gift.”

Mr. Kanas said banks are likely to use the government capital to retire outstanding debt that pays a higher yield than the 5% on the government’s preferred shares. That will reduce funding costs, boosting profits. Such moves will pad bank profits without supporting the overall economy, he said.

Already some politicians, including both presidential nominees, are suggesting the government’s investment should merit additional requirements.

“We will not merely inject billions of dollars into companies and walk away hoping for the best. We will require that those companies be reformed and restructured until they are sound assets again, and can be sold at no loss — or perhaps even a profit — to the taxpayers of America,” said Republican presidential nominee Sen. John McCain.

Democratic nominee Sen. Barack Obama said, “We must make sure this plan is implemented in a way that helps homeowners and does not enrich Wall Street CEOs at the taxpayers’ expense.”


Petition to Eliminate the Federal Reserve

October 14, 2008

In view of what has happened over the past few weeks, the Federal Reserve owned and operated as a Private Bank and was greatly responsible for the Global melt down.

I do highly recommend that the US eliminate it, open and operate a Central Bank of its own. This is done in most countries and works far better and more efficiently then a private banks do.

Kennedy tried to do that very thing during his presidency and was right in doing so. The Federal Reserve is for profit not for the people of the US. They have been absolutely irresponsible and cannot be trusted any longer.

This was an intelligent and necessary move Kennedy made.  Just a pity it was stopped due to his death.

President John F.Kennedy, The Federal Reserve And Executive Order 11110

Every country should have its own Central Bank.

Do the sign the petition Take back what was stolen from Americans in December of 1913 By corruption, coercion and lies. Americans should be able to control their own money. Private banking systems like the Federal Reserve are there to serve their own self interests, not to serve the people.

Now is the time to have them removed as Kennedy tried to do.

Petition to Eliminate the Federal Reserve.

To:  U.S. Congress It Is Time To Abolish the Federal Reserve

Today in August 2007, the world financial systems and investment markets, real estate and the availability of credit are all under direct assault due to past actions of the Federal Reserve in the United States.

We the undersigned now call on Congress to Abolish the Federal Reserve System. The latest boom, mania and subsequent bust in the stock market, real estate, asset prices and now credit around the world are the direct result of easy money policies of the FED designed to enhance the profits of certain financial special interests. Now in 2007, ultimately as usual, the unsophisticated American middle and working class investors and borrowers who believed all the hype will pay the price in financial losses.

Wall Street’s” business as usual” call for the FED to intervene and bail out the corporate perpetrators of the scam is like asking a child molester to run a day care center or a drug dealer to teach our children all about drugs. The private banker owned FED is the cause of our problems not the solution.

Since the creation of the Federal Reserve in secret at Jekyll Island, Georgia in 1913, “middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve’s inflationary policies. This represents a real, if hidden, tax imposed on the American people….

From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial “boom” followed by a recession or depression when the Fed-created bubble bursts.” – Congressman Ron Paul, U.S. House of Representatives September 10, 2002

GOP Presidential Candidate Ron Paul was right back in 2002 and he is right today about abolishing the Federal Reserve and the necessity for the United State to return to a Gold Standard in order to protect the dollar from political and Wall Street banker manipulations which ultimately will destroy the dollar as a store of value and the financial security of millions of American investors and other innocent hard working citizens around the world.

Please Take the Time to Sign the Petition

There are currently 3811 Total Signatures

I would love to see a few million before the end of the week the race is on.

One person can make a difference.

One voice can become a million,

A million voices can become a billion voices.

A few billion voices are pretty hard to ignore.

Do pass this around to as many people as you can. Do this before the Federal Reserve and its private owners totally destroy Americas Way of life any further.

Also give them the link to my site so they can become educated on everything that has happened over the past few weeks and they can also learn about who operates the Federal Reserve.  Did You Know

In the interest of the Entire world the US needs it’s own Central Bank.

It is in fact everyones concern, so in my opinion everyone can sign.

Lets go for a few Billion Voices.

Call your Congressmen as well. Call anyone who will listen. Don’t take No for an answer.

Write your local newspapers, get people thinking about it.  Be vocal for the rights of Americans.

A £516 trillion derivatives ‘time-bomb’

Not for nothing did US billionaire Warren Buffett call them the real ‘weapons of mass destruction’

By Margareta Pagano and Simon Evans
12 October 12 2008

The market is worth more than $516 trillion, (£303 trillion), roughly 10 times the value of the entire world’s output: it’s been called the “ticking time-bomb”.

It’s a market in which the lead protagonists – typically aggressive, highly educated, and now wealthy young men – have flourished in the derivatives boom. But it’s a market that is set to come to a crashing halt – the Great Unwind has begun.

Last week the beginning of the end started for many hedge funds with the combination of diving market values and worried investors pulling out their cash for safer climes.

Some of the world’s biggest hedge funds – SAC Capital, Lone Pine and Tiger Global – all revealed they were sitting on double-digit losses this year. September’s falls wiped out any profits made in the rest of the year. Polygon, once a darling of the London hedge fund circuit, last week said it was capping the basic salaries of its managers to £100,000 each. Not bad for the average punter but some way off the tens of millions plundered by these hotshots during the good times. But few will be shedding any tears.

The complex and opaque derivatives markets in which these hedge funds played has been dubbed the world’s biggest black hole because they operate outside of the grasp of governments, tax inspectors and regulators. They operate in a parallel, shadow world to the rest of the banking system. They are private contracts between two companies or institutions which can’t be controlled or properly assessed. In themselves derivative contracts are not dangerous, but if one of them should go wrong – the bad 2 per cent as it’s been called – then it is the domino effect which could be so enormous and scary.

Most markets have something behind them. Central banks require reserves – something that backs up the transaction. But derivatives don’t have anything – because they are not real money, but paper money. It is also impossible to establish their worth – the $516 trillion number is actually only a notional one. In the mid-Nineties, Nick Leeson lost Barings £1.3bn trading in derivatives, and the bank went bust. In 1998 hedge fund LTCM’s $5bn loss nearly brought down the entire system. In fragile times like this, another LTCM could have catastrophic results.

That is why everyone is now so frightened, even the traders, who are desperately trying to unwind their positions but finding it impossible because trading is so volatile and it’s difficult to find counterparties. Nor have the hedge funds been in the slightest bit interested in succumbing to normal rules: of the world’s thousands of hedge funds only 24 have volunteered to sign up to a code of conduct.

Few understand how this world operates. The US Federal Reserve chairman, Ben Bernanke, tapped up some of Wall Street’s best for a primer on their workings when he took the job a few years ago. Britain’s financial regulator, the Financial Services Authority, has long talked about the problems the markets could face on the back of derivative complexity. Unfortunately it did little to curb the products’ growth.

In America the naysayers have been rather more vocal for longer. Famously, Warren Buffett, the billionaire who made his money the old-fashioned way, called them “weapons of mass destruction”. In the late 1990s when confidence was roaring in the midst of the dotcom boom, a small band of politicians, uncomfortable with the ease with which banks would be allowed to play in these burgeoning markets, were painted as Luddites failing to move with the times.

Little-known Democratic senator Byron Dorgan from North Dakota was one of the most vociferous refuseniks, telling his supposedly more savvy New York peers of the dangers. “If you want to gamble, go to Las Vegas. If you want to trade in derivatives, God bless you,” he said. He was ignored.

What is a Derivative?

Warren Buffett, the American investment guru, dubbed them “financial weapons of mass destruction”, but for the once-great-and-good of Wall Street they were the currency that enabled banks, hedge funds and other speculators to make billions.

Anything that carries a price can spawn a derivatives market. They are financial contracts sold to pass on risk to others. The credit or bond derivatives market is one such example. It is thought that speculation in this area alone is worth more than $56 trillion (£33 trillion), although that probably underestimates the true figure since lax regulation has seen the market explode over the past two years.

At the core of this market is the credit derivative swap, effectively an insurance policy against the default in the interest payment on a corporate bond. One doesn’t even need to own the bond itself. It is like Joe Public buying an insurance policy on someone else’s house and pocketing the full value if it burns down.

As markets slid into crisis, and banks and corporations began to default on bond payments, many of these policies have proved worthless.

Emilio Botin, the chairman of Santander, the Spanish bank that has enjoyed phenomenal success during the credit crunch, once said: “I never invest in something I don’t understand.” A wise man, you may think.


Published in: on October 12, 2008 at 11:57 am  Comments Off on A £516 trillion derivatives ‘time-bomb’  
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Fear on streets of Reykjavik as country can only go to IMF for financial bailout

By David Prosser
October 11 2008

Iceland may be the target of British opprobrium right now, but on the streets of Reykjavik, citizens are more concerned about their own increasingly dire situation. The collapse of the country’s banking system and, along with it, the economy, is steadily affecting ever more of the 320,000 people who live on the North Atlantic island.

Yesterday, one of the country’s few daily national newspapers announced it was shutting its doors, while the country’s flag-carrying airline, Icelandair, said it had seen a dramatic slump in demand. No wonder the governor of the country’s central bank has been sent home to rest by his doctors.

Such is the parlous state of its finances, economists now believe Iceland will have no choice but to go cap in hand to the International Monetary Fund and ask the world’s lender of last resort to bail it out.

Negotiations are due to begin with Russia on Monday over a possible loan of €4bn (£3.15bn) but this will not be enough to get the country through its banking crisis. While such a loan would be worth a quarter of the country’s annual GDP, the total liabilities of the Icelandic banks are more like nine times the size of Iceland’s economy.

“Iceland is bankrupt,” said Arsaell Valfells, a University of Iceland professor. “The Icelandic krona is history. The IMF has to rescue us.”

Without help from the IMF, Iceland is almost certain to find itself in the same position as some of its leading financial institutions – bankrupt. The country would simply be unable to service its liabilities and its economy would be plunged yet further into crisis.

The krona, Iceland’s currency, has already collapsed in recent months, but bankruptcy would make it worthless on world markets. And without a viable currency the banks can’t be rescued, there is no cash to pay for essential imports, and no way of controlling inflation. The result is one with which Zimbabwe is now becoming ever more familiar – soaring prices, a big increase in unemployment and terrible hardship for most of the population.

The IMF now represents Iceland’s best bet of getting through this crisis. Not that it is an easy option. The IMF will only intervene in countries on its own terms and Iceland would be expected to accept harsh strictures from the Washington-based organisation.

In the longer term, there will be political fallout from this collapse. Iceland has traditionally been sceptical about the appeal of the European Union, let alone membership of the bloc operating with the single currency. However, the idea of joining the EU – though it would mean putting up with foreign intervention in its fishing, Iceland’s one remaining industry of note now banking has failed – may now become more attractive.

Iceland’s bankruptcy will also shock the developed world. While other countries have quite recently trodden this path – most notably Thailand and several Latin American states – Iceland is considered a developed market by economists. Indeed, until the credit crisis began just over a year ago, the enterprising skills of the country’s bankers had produced one of the best performing economies in the West.

So far, however, Iceland seems to be escaping one other common feature of national bankruptcies – serious civil unrest. Indeed, for now at least, the country seems to be attempting to pull together, with rock stars organising gigs, for example, in an attempt to buoy fellow citizens’ spirits.

Nor has Geir Haarde, the country’s Prime Minister, yet come under pressure to step down – and in public he is attempting to remain calm. “We are gradually moving through this crisis,” he said on Thursday. “There are still a few issues to resolve but that is the nature of these kind of things.” A difficult man to ruffle, clearly.


This all because the Americans couldn’t get their act together. Considering they were the cause of the whole mess. Why should Iceland or any other country for that matter have to suffer.

Britain is treating them like Terrorists imagine that, how sick is Brown anyway? I am beginning to wonder. Then again I wonder about a lot of things.  Brown should be given a good thrashing.

You know Iceland over the years, have pretty much minded their own business and really don’t spend much time bothering anyone.  It is one of the most peaceful places on the planet. What a shame, such a nice country is being destroyed by US stupidity. So what does the US and Britain want from Iceland I wonder?

Meanwhile the US has destroyed so many.  With war, bad politics, mismanagement, along with their high and mighty know it all attitude. It seems to me they know very little, except how to exploit others. Their advice is not to be trusted. Well take at look at what they have done. Self Explanatory. They aren’t the smartest crayons in the box.

Going to the IMF would be my worst nightmare.

So Bush and his croonies have the whole planet sucked into their nightmare. Why does the rest of the world have to put up with their predetory, imbacilic, stupidity anyway. I think is about time they were all told to shut the bloody hell up. They, obviously don’t know what they are doing. Because of their aragant, foolishness, the rest of the world, is as usual suffering, because of their mistakes.  Yes they are just so cleaver.

Published in: on October 11, 2008 at 6:37 am  Comments Off on Fear on streets of Reykjavik as country can only go to IMF for financial bailout  
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Asian stocks plunge on fears of global recession

An investor points at the stock price monitor at a private security company in Shanghai, China on Tuesday, Oct. 7, 2008. (AP / Eugene Hoshiko)
An investor points at the stock price monitor at a private security company in Shanghai, China on Tuesday, Oct. 7, 2008. (AP / Eugene Hoshiko)
Oct. 8 2008
The Associated Press
TOKYO — A meltdown in confidence strangled Asian stock markets Wednesday on accelerating fears that the widening financial crisis could spawn a global recession.

After a miserable day on Wall Street when the Dow Jones industrials lost more than 500 points, investors from Tokyo to Mumbai, Seoul to Sydney dumped shares in a broad regional sell-off.

Anxious investors in Tokyo sent shares into a free-fall, with the benchmark Nikkei 225 stock average plunging 9.4 percent — its biggest drop in 21 years — to 9,203.32, a five-year low.

“Selling on Wall Street triggered further selling in Tokyo. It’s like a chain reaction,” said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC Co. Ltd. “No one knows the bottom of the ongoing financial crisis, and investors were really spooked by growing uncertainty over the global credit crisis.”

Accelerating the pessimism were doubts that finance ministers and central bankers from the Group of Seven nations would unveil any effective measures at their meeting in Washington Friday.

Indonesian authorities shut down trading for the day on the country’s exchange after the key index plunged more than 10 percent, driven by huge losses in commodities stocks. Investors dismissed comments by the central bank governor Tuesday that Indonesia will avoid the worst of the global credit crisis. They also reacted negatively to a quarter-point rate hike announced Tuesday to rein in inflation.

“What is happening is panic selling to an extent that it is irrational,” said Irvin Patmadiwiria, the head of investments at PT Lautan Dana Investment Management in Jakarta.

Hong Kong’s de factor central bank said it would slash its benchmark interest rate by 1 percentage point to 2.5 percent to help ease the credit crunch.

The move by the Hong Kong Monetary Authority, effective Thursday, is a break from the territory’s traditional pattern of closely tracking the U.S. Federal Funds target rate, now at 2 percent. The HKMA revised its formula for calculating its base rate from 150 basis points above the prevailing U.S. fed funds rate to 50 basis points.

“One has to do extraordinary things at extraordinary moments,” said Jacky Choi, a Hong Kong-based fund manager at Value Partners Ltd., which manages about $5 billion in Asia.

Russian news agencies say Moscow’s MICEX stock exchange, where most of Russia’s trading takes place, has shut until Friday after losing more than 14 percent in the first half-hour of trading Wednesday.

It was a brutal day across Asia.

Hong Kong’s blue chip Hang Seng index shed 5.2 percent, and India’s Sensex sank 4.3 percent. Seoul’s Kospi lost 5.8 percent, Taiwan’s key index fell 5.8 percent, and Singapore’s benchmark tumbled 5.5 percent.

Australia’s benchmark S&P/ASX200 closed down 5 percent, wiping out gains Tuesday after the country’s central bank cut its key interest rate by a bigger-than-expected 1 percentage point.

“People are very, very nervous that Europe will get belted tonight as they didn’t see a lot of the late losses in the U.S. session, and people just think it’s going to get worse,” said Ric Klusman, an institutional dealer with Aequs Securities in Sydney.

In New York Tuesday, the Dow lost more than 5 percent despite efforts by the Federal Reserve to reinvigorate the dormant credit markets by invoking emergency powers to lend money to companies outside the financial sector and buy up mounds of commercial paper, the short-term debt that firms use to pay for everyday expenses like salaries and supplies.

Federal Reserve Chairman Ben Bernanke warned in a speech Tuesday that the financial crisis could prolong the difficulty the economy is facing. While his remarks were widely regarded as a sign that an interest rate cut could be in the offing, Wall Street appeared little comforted and focused on his downbeat assessment.

The downturn bodes ill for major Asian exporters dependent on the U.S. for a big chunk of their business.

Shares of Toyota Motor Corp. plunged 11.6 percent Wednesday, as investors recoiled on reports that operating profit at Japan’s top automaker would fall 40 percent this fiscal year through March.

The automaker’s operating profit is expected to total about 1.3 trillion yen ($12.8 billion), short of the 1.6 trillion yen forecast ($15.8 billion), according to the Nikkei financial daily. It may also miss its global sales target of 9.5 million units this year, the paper said.

Other Japanese carmakers were also dragged down on the news, as well as a wilting dollar. Honda Motor Co. lost 10.3 percent, and Nissan Motor Co. was off 9.9 percent.

In currencies, the dollar briefly fell below 100 yen for the first time in six months. It sank as low as 99.58 yen and was trading at 100.45 yen Wednesday afternoon in Asia. The euro gained to $1.3652 compared with $1.3550.


Published in: on October 8, 2008 at 10:38 am  Comments Off on Asian stocks plunge on fears of global recession  
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Iceland government seizes control of Landsbanki

David Teather

October 07 2008

The Icelandic government this morning seized control of Landsbanki, the second-largest bank in the country, and sought to secure a €4bn loan from Russia as it worked to avert a financial meltdown.

The government moved quickly to use sweeping powers over the country’s banks granted in the Reykjavik parliament last night. The board of directors at Landsbanki has been dismissed and the bank put into receivership. The government has also loaned €500m to Kaupthing, the biggest bank in Iceland.

UK savers trying to access their Landsbanki-run Icesave accounts this morning were faced with a message telling them the bank was unable to process requests for deposits or withdrawals. Icesave offered competitive rates and has more than 200,000 accounts in the UK. The first €22,000 (roughly £17,000) held in the accounts is secured under an Icelandic compensation scheme, and the remainder up to £50,000 is guaranteed by the British government.

On state radio, commerce and banking minister Bjorgvin Sigurdsson sought to reassure people in Iceland that the bank would remain open and continue to run as normal.

The Landsbanki chairman and a large shareholder in the bank is Bjorgolfur Gudmundsson, the owner of West Ham United football club.

In an address broadcast on Icelandic television last night, prime minister Geir Haarde announced plans to rush through the emergency bill, supported by opposition parties, allowing the government to push through mergers between the battered banks or force them into bankruptcy.
“We were faced with the real possibility that the national economy would be sucked into the global banking swell and end in national bankruptcy,” he said.

There was some confusion about whether the loan from Russia had been agreed. Iceland’s central bank said in a statement that it had been informed by the Russian ambassador that Iceland would be given a €4bn loan and that it had been agreed by the Russian prime minister, Vladimir Putin. The bank said Haarde had approached the Russians about a loan some months ago.

But the Russian state news agency separately quoted the deputy finance minister, Dmitry Pankin, as saying there had been no formal approach from Iceland and that no decision had been made. The Icelandic bank then updated its statement to say that negotiations would begin “in the next few days”.

The Icelandic Financial Services Authority said it had taken control of Landsbanki to “guarantee a functioning domestic banking system”.

The fate of Iceland, which has extensive interests in the UK, is seen as a warning for the rest of the world, after a long boom fuelled by debt, a dependence on its banking industry and a buoyant housing market.

Time appeared to be running out for Iceland to deliver a solution to the financial crisis yesterday as its currency, the krona, slumped 30% against the euro, accelerating a decline that has been taking place over the past year.

The emergency bill would also allow the government to take over housing loans held by the banks.

The Icelandic government now has control of two of the biggest three banks in the country — the only one remaining in private hands is Kaupthing.

Last week, Landsbanki sold the bulk of its international operations, including the London-based Landsbanki Securities, the former Teather & Greenwood, to smaller rival Straumur-Burdaras, to try to bolster its capital base. But with the wholesale markets closing down, banks are finding it difficult to raise the short-term funding necessary for their day-to-day operations, especially when there is nervousness about an institution’s stability.

Kaupthing and Straumur-Burdaras said in a statement this morning that they continued to operate as normal and had no indication that the government intended to intervene.

The financial regulator yesterday suspended shares in Iceland’s main banks to prevent panic selling. The government also followed Ireland and Germany by guaranteeing all domestic deposits in Icelandic savings accounts.

Concerns about the Icelandic economy grew stronger last week after the government seized control of the third-largest bank, Glitnir, taking a 75% stake in return for €600m (£466m). Haarde warned Icelanders at the time of “the inevitable cut in living standards” to come.

The falling currency, which closed at a record low of 230 Icelandic krona to the euro, is worsening the crisis for the banks, which are shouldering large overseas debts, and for many thousands of individuals in Iceland who were encouraged to take out loans in foreign currencies.

In Iceland, there is widespread fear. Sigridur Dogg Audunsdottir, a local government worker in Reykjavik said everyone in the country was “holding their breath”. Yesterday, she withdrew cash from the bank all the way to her overdraft limit to make sure her family had enough to live on. “It is just unimaginable. It is so dark and gloomy, we have never experienced anything like this. I took out my money just to be safe, because I felt I had to do something. We’ve all been living ahead of ourselves, so in many ways this was inevitable. People here have been so obsessed with money. Iceland is like a nouveau riche country.

“I am not blaming the people. The problem seems to be oversized banks in a small economy. We trusted the banks and they encouraged us to borrow money.”

A collapse in Iceland would severely dent confidence in the broader financial markets. But it could also affect Britain, with the main banks funding a string of companies and entrepreneurs, including Robert Tchenguiz, a large investor in Sainsbury’s, chef Gordon Ramsay and property tycoons the Candy brothers.

One of Iceland’s biggest companies, Baugur, has stakes in a swath of the British high street, including House of Fraser, Karen Millen, Oasis and Whittard of Chelsea. One of the biggest credit insurance firms has stopped covering suppliers to Baugur-controlled stores. In a statement over the weekend, it reiterated that most of the funding of its businesses comes from international banks and that it has little exposure to the disaster-struck Icelandic economy.

Haarde is said to have approached other Nordic governments to see if their central banks might be prepared to inject liquidity into the Icelandic system. Haarde said the banks had agreed at the weekend to sell some overseas assets and bring the cash back to Iceland.

The country’s pension funds, which have assets of €12bn, are also being encouraged to repatriate cash.
Kaupthing holds deposits for thousands of UK savers through its Kaupthing Edge account. Kaupthing Edge is covered by the UK government guarantee on deposits up to £50,000. A spokeswoman for Kaupthing said there had been no rush to close accounts.

Richard Portes, an expert on Iceland at the London Business School, said the government had made a mistake by nationalising Glitnir, creating fear in the markets instead of just providing it with liquidity.
“You have the same law of unintended consequences that you had in the case of Lehman Brothers,” he said. “The Iceland problem was immediately vastly exaggerated.”

He said the Icelandic banks had been unfairly targeted. “The world is a little unjust. They don’t hold any toxic papers. The assets they will have to sell are perfectly good assets. They have been prudently managed and haven’t been excessively dependent on the wholesale money markets compared to anyone else,” he said.

Iceland has undergone a remarkable transformation in the past couple of decades, from an economy largely based on fishing to one of the richest in Europe, driven by its biggest banks after deregulation of the banking system. The banks grew rapidly on borrowing and have assets eight times Iceland’s GDP. But the party has come to an end, with the krona losing more than half its value against the euro in the past 12 months, inflation at 12% and interest rates at 15.5%.


Published in: on October 7, 2008 at 9:11 pm  Comments Off on Iceland government seizes control of Landsbanki  
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Icelands, Icesave freezes deposits and withdrawals

Hilary Osborne and Miles Brignall

October 07 2008

The internet bank Icesave has suspended all deposits and withdrawals from customers’ accounts after the Icelandic authorities stepped in to rescue its parent company Landsbanki.

Landsbanki’s other UK operation Heritable Bank has also stopped savers making withdrawals and is no longer offering mortgages.

Between them the two brands have more than 300,000 customers in the UK, with Icesave winning savers with its high interest rates on savings accounts and Isas.

Today a statement on its website said: “We are not currently processing any deposits or any withdrawal requests through our Icesave internet accounts. We apologise for any inconvenience this may cause our customers. We hope to provide you with more information shortly.”

Although Landsbanki is set to continue trading as normal in Iceland, it is not clear what will happen to Icesave or Heritable Bank in the UK, but the Financial Services Compensation Scheme has said it is preparing for the bank to go into default.

A message on its website tells consumers: “The Financial Services Authority in the UK has reported that Icesave is now expected to go into insolvency proceedings in Iceland and this would trigger an FSCS default.”

Yesterday, Icesave’s website went down and its UK call centre is reported to have received unprecedented volumes of calls from savers worried about the safety of their cash.

But a spokeswoman for the group insisted that call volumes had been normal and the website was down due to technical difficulties.

Concerns about the Icelandic economy came to a head yesterday, and the Icelandic government last night presented an emergency bill giving it sweeping powers over the nation’s banks.

This morning the Icelandic Financial Supervisory Authority (IFSA) announced it was taking control of Landsbanki, as it became the latest victim of the credit crunch.

The IFSA said domestic deposits were fully guaranteed by the government, and that “Landsbanki’s domestic branches, call centres, cash machines and internet operations will be open for business as usual”.


The 100% guarantee does not extend to UK savers, who would have to apply for compensation both in Iceland and the UK, and would only be able to recover up to £50,000.

The first €20,000 (£16,264) they hold is protected under the Icelandic government’s scheme, and the remainder up to £50,000 by the UK Financial Services Compensation Scheme (FCSC).

A spokesman for Landsbanki said 95% of Icesave’s customers had deposited less than £50,000, so would be fully protected by the FCSC.

At the start of 2008, Heritable had around £900m on deposit from UK savers.

It used the money to provide specialist finance for property developments, and some residential mortgages. All new lending appears to have been suspended.

Unlike, the savers who had their money in an Icesave, all Heritable savers’ money is covered by the FSCS up to £50,000 (£100,000 for joint accounts) in the event that Landsbanki ceases to exist.

Trading normally

As news of Landsbanki’s failure emerged representatives of Kaupthing, the other major Icelandic bank with a significant UK savings operation, were desperately trying to halt a Northern Rock-style run.

By mid-morning concerned savers were deluging the bank’s retail division Kaupthing Edge’s call centre keen to establish whether the bank was still trading, and in many cases to move their money.

The call centre number has been permanently engaged all morning.

Kaupthing Edge, which is thought to have at least 150,000 UK savers on its books, had been offering some of the most attractive savings rates in the market for the past few months.

A spokeswoman for the firm said: “Kaupthing has not been nationalised and is still trading normally. Yes, people are concerned, but I stress there is no reason to move your money. There is no reason to panic.”

She added: “All savers’ money is covered to £50,000 by the Financial Services Compensation Scheme (FSCS) and nothing has changed today in this respect. The company is processing all requests to move money in the normal way.”


Case study: Nick Stringer stands to lose his retirement fund after locking it away in an Icesave account

Published in: on October 7, 2008 at 9:06 pm  Comments Off on Icelands, Icesave freezes deposits and withdrawals  
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Questions the Government faces over banking guarantees

October 6, 2008

The Government is facing increased pressure to follow its European counterparts in pledging 100 per cent protection for UK savers.

What has the German government pledged?

Chancellor Angela Merkel vowed that the federal government would guarantee all private savings accounts in German banks. Finance minister Peer Steinbrueck said that from today German citizens need not worry about “a single euro of their deposits” during the global financial crisis.

Is Germany the only country to offer such a promise?

No. Last week Ireland said all money held in savings accounts at six institutions – Allied Irish Banks, Bank of Ireland, Anglo-Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society – will be guaranteed in their entirety.

Greece has likewise guaranteed its depositors’ savings.

What is the situation in the UK?

In the UK, savings of £50,000 are covered under the Financial Services Compensation Scheme (FSCS). The limit relates to deposits with an organisation, regardless of how many accounts the customer holds. The limit had, until recently, been set at £35,000 but as a result of the current crisis, ministers agreed to up the ceiling.

Can UK citizens benefit from the announcements in other countries?

Yes. Three Irish banks – Allied Irish Bank, Anglo Irish Bank and Bank of Ireland – have branches in the UK. These will be covered by the Irish Government’s guarantee and British citizens can open accounts with relative ease at branches in the UK. In addition, the Post Office’s savings products are run by Bank of Ireland, giving customers 100% protection.

There is also nothing stopping UK customers opening up an account with a bank branch in Ireland. Although it may be harder, as many will want you to appear in person to open the account.

How have British banks responded? Aren’t they at a disadvantage?

On Wednesday the British Bankers’ Association (BBA) challenged the Irish government, claiming that the guarantee was anti-competitive, especially for banks in Northern Ireland. It fears that UK savers will move their money to Irish banks in a bid to benefit from the guarantee offered.

But don’t some institutions in the UK already offer 100 per cent protection?

Yes. When Northern Rock collapsed, the UK Government made an exception to end the run on the bank, ensuring that all of the Rock’s savers will have deposits covered in their entirety.

National Savings & Investment, which is backed by the Treasury, also offers complete protection on people saving through its products.

And Bradford & Bingley savings are safe while part of the collapsed bank goes through the process of being transferred to Santander, owners of Abbey.

So, if ministers pledged complete protection for Northern Rock and Bradford & Bingley, what’s to say they won’t do the same if another bank fails?

Nothing. The whole question in many experts’ view is purely theoretical. It would, it is argued, be almost inconceivable for the Government to let savers lose their money as a result of a bank failing.

Unlike more risky investments, people are not given explicit warnings that they could lose their savings – the whole stability of the banking system depends on the belief that money is safe in the bank.

If people started to lose money, it would lead to instability on a grand scale and a return to a run on the banks as panicked savers attempt to move cash out.

So why don’t the Government just follow the German and Irish lead and guarantee all savings?

Because it shifts liability from the banks to the taxpayers. And we are talking about a lot of money. Estimates suggest it would mean a risk running into the trillions of pounds – that is £1,000,000,000,000s. This would place a huge burden on public finances.

And it could be the “thin end of the wedge”, some fear. Bank’s business customers may be next in asking for their money to be covered.

An 100 per cent guarantee could also impact on the Government’s ability to raise funds which in turn could hit public spending. The theory has it that with a promise to protect all savings, people would be less willing to buy into secure state-backed bonds.

The main attraction of Government “gilt-edged” bonds is that they are seen as one of the safest places you can put money.

If bank saving accounts are covered by a Government guarantee this will no longer be the case. As such they would be deemed to be less attractive, especially as they currently offer a return which is less than that of a top savings account.


Published in: on October 7, 2008 at 8:54 pm  Comments Off on Questions the Government faces over banking guarantees  
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