News & Analysis
Iceland Alone in Bank Criminality?
Wednesday, April 14, 2010 - by Staff Report
Henry Paulson
Iceland's banks gave "excessive" loans to a handful of powerful billionaires, including Robert Tchenguiz, the property entrepreneur, Jon Asgeir Johannesson, the retail tycoon, and Bjorgolfur Gudmundsson, the former owner of West Ham FC, according to a damning inquiry. Its parliamentary investigation - The Truth Report – found numerous potential cases of illegality, including possible share price manipulation and exaggeration of asset values, within the island nation's three banks - Kaupthing, Glitnir and Landsbanki. The long-awaited report also suggests that the banks were effectively controlled by five investors wielding "unlimited influence", with some acting as shadow directors. The report accuses the bank's owners of pressuring management into awarding loans to their companies and friendly clients, with little or no collateral. ... It emerged in the report that companies connected to Mr. Gudmundsson, whose family owned 40pc of Landsbanki, had borrowed almost as much as the entire £2.3bn Icesave debt to finance their own private investments. The loans amount to 140pc of the bank's equity. The report quotes Sigurjon Arnason, ex-chief executive of Landsbanki, as saying: "Resisting the requests from the owners of the banks would have equalled quitting from my position." The report also criticises Kaupthing's loans to London-based property entrepreneur Mr Tchenguiz, whose companies received £1.4bn. ... The report adds that it is "difficult to see how loans of this magnitude were taken with the bank's interests in mind." – UK Telegraph
Dominant Social Theme: About time the evil in Iceland was exposed.
Free-Market Analysis: We are not surprised that financial clout as regards Iceland's major banks was concentrated in only a few hands. We were fairly sure this would be the case, just as we were sure that Iceland's central bank itself would be found wanting. The Telegraph reports that, "former central bank manager David Oddsson turned down help from his UK counterpart Mervyn King." We'd probably turn down that "help" as well, but the inquiry seems to find it damning.
Probably everyone involved in the inquiry knew that significant manipulation would be exposed. But the idea that these sorts of activities are restricted to Iceland is questionable. We are sure that whatever went on regarding Iceland's banks is also present elsewhere in the West. The financial system under which the West operates places banks at the pinnacle of financial activity and enshrines their power via regulatory fiat. This sort of mercantilism – where money power is concentrated within the banking industry and organized by central banks that have direct relationships with the government involved – is bound to generate corruption.
READ ON HERE
Dominant Social Theme: About time the evil in Iceland was exposed.
Free-Market Analysis: We are not surprised that financial clout as regards Iceland's major banks was concentrated in only a few hands. We were fairly sure this would be the case, just as we were sure that Iceland's central bank itself would be found wanting. The Telegraph reports that, "former central bank manager David Oddsson turned down help from his UK counterpart Mervyn King." We'd probably turn down that "help" as well, but the inquiry seems to find it damning.
Probably everyone involved in the inquiry knew that significant manipulation would be exposed. But the idea that these sorts of activities are restricted to Iceland is questionable. We are sure that whatever went on regarding Iceland's banks is also present elsewhere in the West. The financial system under which the West operates places banks at the pinnacle of financial activity and enshrines their power via regulatory fiat. This sort of mercantilism – where money power is concentrated within the banking industry and organized by central banks that have direct relationships with the government involved – is bound to generate corruption.
READ ON HERE
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