Wednesday, 8 October 2008

SHEER UTTER STUPIDITY - ICESAVE BAILOUT

I've just read that we, the British taxpayers, are to bail out all the cretins that put more than £50,000 into that dodgy foreign bank (Icesave) that was paying an excessive rate of interest. How stupid is that? In future should we move all our savings from the UK banks and put them with whichever minor, previously unheard of, foreign bank is paying a better rate of interest? Why be content with 6% when the Bank of Timbuktu may pay us 7%+. After all there will be no risk - our Labour Government would come to our rescue with taxpayers' money! Unbelieveable!

POSTSCRIPT : It now appears that 20 local councils in the UK have deposited hundreds of millions of pounds with these Icelandic banks. Heads should roll in these councils and the "responsible" officials who put public money at risk in these Icelandic Casinos should be named and shamed. UPDATE : Ipswich Borough Council have £5million deposited in Icelandic banks. That's the annual Council Tax of 4,000 hard working Ipswich families.

UPDATE - FRIDAY 10TH : The country of Iceland is now for sale on ebay. Hopefully this link will work

17 comments:

Scrat said...

Thank you....I am one of those "cretins". F*** off. Keep your self sanctimonious views to yourself and go and learn how to be a human being. All my savings were there....not a huge amount by most standards, but ALL I had, nonetheless. My future plans are in question, but my life will go on. I've been through tough times before....but I've come through with cpmpassion and empathy....which is more than you would understand.

Elaine said...

Although I have sympathy for those people who may have lost everything, I agree with you Troy. I haven't even got £50 in savings - and no one ever comes to my rescue.

Anonymous said...

Iwent through it last year with northern rock [substantial sum] and all i can say is ''dont worry'' it will turn out all right in the end. Ignore the small minded envious people who have never made anything of their lives or tried.

Anonymous said...

Your comment, while certainly controversial and attention grabbing (attenton seeking?), has a number of flaws. Firstly, given the current state of the UK economy the removal of £4 billion pounds overnight would be utterly disasterous and would cost more to the tax payer in the long run. Secondly, this was no Bank of Timbuktu, it was a large, regulated, European bank whcih was covered by a guarantee. The Iceland Government used this guarantee to attract billions of pounds worth of money into the Icelandic banking system and then, extrordinarily, refused to honour it's committment when the deal went sour. Those that put money into Icesave weren't cretins and they weren't stupid because even if one did the research, Icesave looked like a safe deal. Thirdly, if the government of Iceland is allowed to default on its guarantee, the guarantees of other governments, like the UK, will be percieved with suspicion and we will risk a run on the banks, which could make this disaster worse and more costly to the taxpayer. Finally, the UK government just announced a £50 billion rescue package whcih analysts are already reckoning is too small. The £4 billion restored to Icesave savers will go straight back into the British Banking system and will help alleviate the crisis. If the UK govenment were to do anything other than guarantee the Icesave saver's moneies, it would be shirking its responsibilities to us, the taxpayer. Your every man for himself attitude, as Icelands government has just spectacularly demonstrated, it what got us into this mess to begin with. So, kudos for the controversy... but a little thought next time before the emmotional tirade?

Elaine said...

What's with all the anonymous comments? I HATE it when someone doesn't put their name to a comment.

And if anon poster #1 was referring to me, just let me know. I don't want to turn Troy's site into an argument platform.

Anonymous said...

How very patronising of one of your readers to pre judge you by saying 'more than you would understand'. How does the person know what you have been through in your life. Maybe it is a past loss that has made you more wary. I too have very little savings but the bit I do have I ensure that it is kept in the UK under UK protection laws. It is always a gamble where money is put, but overseas is an even bigger gamble. We will be at the stage soon where we will be bailing people out of there gambling debts! For the sake of a 1%difference in interest it is better to leave money in the UK.

Chris said...

I think there are two completely separate sets of savers being protected here by the UK government. The first set are the people who put over £35000 into Icesave knowing full well (or in complete ignorance, neither is a good thing) that if the bank goes under, that money is not 100% guaranteed. The second set of people (myself included) are those with less than £35000 in such an account where they were made to believe that money was fully guaranteed by large, successful financial insitutions and the FSCS.

I think lumping those two sets of people together and branding them cretins is a gross over-simplification. I think the UK government is absolutely right to cover the first £16000 which should ahve been covered by Icelands gaurantees, and then sue the Icelandic government for failing to live up to those guarantees.
The only point of debate in my mind is whether Alastair Darling is right to guarantee peoples savings above the (then £35k now £50k) limit. Yes, those savers should ahve been aware of the risk of losing their money as it wasn't guaranteed, but which is the greater cost to the UK economy? Guaranteeing that money, or allowing *for the first time in this crisis* UK savers to lose their money? Clearly the government think the latter is the more expensive long term option...

Anonymous said...

As I understand it the Icesave bank has the following protection for its savers: The first 20,ooo EUR's are covered by their financial system, and the remainder up to a vlue of £35k in total is covered by the UK system. Any savings over £35k are not guaranteed. I do not know what the UK government have said excatly today, but I strongly feel that any amount over the £35K figure SHOULD NOT be covered by UK tax payers. Savers should know the terms of a savings account when they open the account. If they don't then that really is their responsibility, therefore their risk and finally their loss.

Chris said...

Anonymous @ 16:17 - yes you're correct with your numbers, except that the FSCS will, as of yesterday, guarantee up to £50k instead of £35k for any bank going under.

Further to that, the UK government today have guaranteed that 100% of UK Icesavers deposits will be guaranteed, regardless of amount. A huge personal relief for me as it seems the Icelandic compensation system has just £88 million in the bank against potential claims of £4 billion form the UK alone. Please note, I did NOT have more than £35k - in fact I had less than 20000 euros and therefore stood to lose every penny despite "guarantees".

I agree with your point that guaranteeing deposits over £50k could be a pretty galling thought for UK tax payers not caught up in the Icesave mess. But I don't think you can ignore the hidden cost to the economy of NOT guaranteeing that money and letting UK savers lose out. That would be a very dangerous precedent at a very dangerous time.

East Anglian Troy said...

In the words of Mrs Merton "let's have a heated debate!" This is what blogging is all about!

PLEASE NOTE - my comment was only directed at those who put MORE THAN £50,000 into Icesave. They did that knowing full well what the rules were. If this £4billion had gone into UK banks (some paying 6.5%)perhaps our banks wouldn't be in the mess they are today.

I've lost money with shares that have gone down in value - should I be recompensed by the UK taxpayer? NO, NO, NO!

John Woodman said...

I'm don't agree with Troy's language but his point is certainly right. Yes, savings up to £50,000 should be covered (and probably would have been in any event if Iceland refused to pay) but why on earth should any amount above that be paid by the rest of us? Its been clear for ages that Iceland (not in the EU) was grossly over geared, even mor than the UK, and their banks were unsustainable. If peopel don't think about where their money goes, or want to take the risk that comes with higher returns, thats fair enough. But why should the rest of us suffer.
And as Troy says, what does this mean in say 10 years time when all this hassle is out of the way? It means there will be no concept of security in savings.

I must admit though that I am much more worried about Iceland having to be bailed out by Russia: Iceland is stragegically a bit too important to become a Russian client state and this could be a risk for energy security and stability.

Hadriana's Treasures said...

Gosh Troy you've started something off here! I used to work in Correspondent Banking for one well known high street bank and then for one foreign bank (who had been rescued by its Govt.) in the City. I should know more than most about where I put my/our savings. We were very lucky and had spent (long story) most of our savings which we had with Icesave. I think we have about £70 in there now. I think the debate here is very interesting and there is some trouble ahead as the song goes. When the furore dies down I think a certain M. Thatcher deregulated the markets too much and now Labour is mopping up the aftermath too much. That said, I feel very much for those savers with savings over the £35k/£50k mark who must be still growing grey overnight. Overall how the markets worked and became too globalised/under regulated/allied with the City's bonus culture...these are the real questions and must be addressed very soon.

East Anglian Troy said...

Well I never thought when I started this blog back in the Summer that I would generate this much debate!
I took out my first mortgage back in 1980 pre the deregulation. I had to virtually get down on my hands and knees to get it. They was little choice, little flexibility and just one high single interest rate (no options). Deregulation has improved choice immensely. However I always have always been cautious with my borrowings (pre-retirement) and now with my surplus funds (post retirement). Over the last few months every newspaper has repeated time and again that people should spread their deposits and not have all their eggs in one basket. I've just worked out that I would have had over £2,000 more net interest a year if I'd sunk all my money into Icesave. Instead I spread it around UK institutions including the B&B on various fixed rate deals. I looked at Icesave, Kaupthing and some Indian and Turkish outfits but thought they looked higher risk. So now I've had lower interest and I (as a taxpayer) am having to bail out those that were less cautious/more greedy (delete as a applicable).

Hadriana's Treasures said...

I think it depends on how cautious you are Troy...I guess that a lot of people thought that a bank going bust would never happen. I've worked in banking so I know it does happen with alarming frequency. This debate can run and run. I suppose ultimately the Govt. are doing it to stop a huge run on all banks, thereby creating a complete and utter meltdown. I truly think we are still teetering on the brink of that.

Brit' Gal Sarah said...

Unbelievably my mum tells me she had sone savings in this bank, not alot but some!! And guess why - because she thinks some financial guy with a website and a radio spot is god, yes come on down Martin Lewis!

I have been telling her for ages to not believe everything he says, maybe now she'll listen!

Arthur Clewley said...

The people who put their money in icelandic banks forgot the old adage that 'if if looks too good to be true it probably is' but looking at the number of UK individuals and organisations who should have known better who are exposed to this it seems it not just icelanders who believe in fairies.

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