130 likes | 246 Views
Alistair Darling and the Icelandic Bank Collapse. SIC Correctly Identified Risks. Icelanders shocked and dismayed by collapse SIC, Special Investigation Commission, set up with immunity and exceptional powers
E N D
SIC Correctly Identified Risks • Icelanders shocked and dismayed by collapse • SIC, Special Investigation Commission, set up with immunity and exceptional powers • Conclusion: Rapid credit expansion and excessive, obscured risk, created by three business groups • True, but SIC neglected other source of systemic risk: discrepancy between field of operations and field of institutional insurance
Foreign Factors Crucial • SIC identified vulnerabilities in Icelandic banking sector, systemic risks • Neglected US and UK crucial decisions entering into vulnerable situation • Darling’s revealing 2011 account of crisis
Darling on Icelandic Bankers • P. 137: Bankers, or clients, made “handsome donations” to Conservative Party • Wrong: None of them donor; however, the Rowland family, post-collapse owner of Kaupthing Luxembourg, confusion • P. 152: Icelandic private jumbo jets in Luxembourg • Wrong: Cargo planes belonging to Air Atlanta which bought them 1993, long before boom
Darling on Minister B. Sigurdsson • P. 137–8: At 2 Sept. 2008 meeting, Minister and staff “did not realize just how bad a state Landsbanki was in” • Was Darling aware of the bad state in which British banks found themselves? • And was Landsbanki in a bad (risky) state because of British reluctance to move accounts? • Recovery rate much higher than expected
Darling on Minister G.H. Haarde • P. 137: Iceland “rapidly becoming insolvent” • Wrong: Economy basically sound • P. 137: Icelandic Minister preferring Russian loan • Wrong: Credit lines and currency swap lines refused by traditional allies • P. 147: “undertakings … sufficient money” • Wrong: Icelandic authorities never made such undertakings
Account of Conversation • P. 147: Prime Minister Haarde tried to negotiate down payment from KSF • Haarde categorically denies this • No basis for the allegation that KSF illegally transferred money to Kaupthing • Book-keeping device: mutual loan agreements
Darling on Minister Mathiesen • P. 152: Complained, not told the full story • Wrong: Icelandic authorities did nothing to mislead their British counterparts • P. 154: Other version than in contemporary interviews on conversation with Mathiesen • UK Treasury Committee concluded that the account was wrong • Mathiesen did neither accept or deny any obligations
Sources of Hostility • Exceptional hostility towards Icelanders in book • Ordered his pilot to avoid Icelandic airspace (perhaps a joke) • Possible explanation: upstarts, newcomers, outsiders in British establishment • Another explanation: Scottish angle, “arc of prosperity”
Conclusions • Interest in, and hostility towards, Iceland by Darling and Brown extraordinary • Government did not help British banks owned by Icelanders, but RBS and HBOS and Bradford and Bingley, etc., anti-terrorism law • No currency swap deals and empty promises of cooperating with winding down system • Predictions in 2005 and 2008 by a ret. CBI Governor and a Senior Person in finance