So you may all have heard about Iceland's woes. The biggest bank, Landsbank (with its branch IceSave) collapsed, and some $5.3 billion was lost largely by Dutch and British savers. The Dutch and British governments repaid their citizens, but demanded that Iceland - the government and people - pay back the $5.3 billion. The $5.3 billion represents 40% of the GDP. It is as if Americans were being asked to pay $2-3Trillion to repay the Chinese government for losses borne by Chinese citizens in US banks. No wonder the Icelanders are saying NO.
The real problem here is that Iceland - like every other western country since Reaganism/Thatcherism has socialized the risk without socializing the rewards. So taxes are very low on big bankers, but if they fail, we're all on the hook for it. Here in this country, we wen tthrough our own version of this bank bailout last Fall.
Now what's happening? We can't really afford to de-socialize the risk. That would mean ending the FDIC guarantees that have prevetned bank runs and all that. And we don't really know how to chop up banks so they are not too big to fail. The answer is to regulate heavily against risk and to socialize the rewards - to have special taxes on bank profits and have bankers pay into a big risk insurance pool to hedge for their own greed and ineptitude.
But it's not happening. The Republican party just says NO. Paid huge amounts of money by the financial services industry, they are resisting any meaningful change in the system that has made the bankers so wealthy and taxed the rest of us so much. It's time to demand real change. It's too bad we don't have our own IceSave crisis to help out. 1/4 of the Icelandic citizens signed an online petition against the bailout already, and the government is going to have to reconsider what to do.
Oh, and the rich bankers themselves who made all the money? So far, no punishment. I want to see punishment and restitution here. I want to pass a 150% bonus tax on all bank bonuses in excess of $50,000 received in the last 5 years. And we need to make it a crime, punishable by hard labor if possible, to cause losses of this magnitude.
Saturday, March 06, 2010
IceSave and the Recession
Posted by The Law Talking Guy at 8:53 AM
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2 comments:
This may sabotage Iceland's chances of EU membership. The British government could retaliate by making membership conditional on the Icelandic government pay for a British bail out that Britain undertook unilaterally.
With a 93% NO vote registered this morning, Europe is just going to have to renegotiate. That kind of margin will surely wake up Westminster and the Hague to the political impossibility (not to mention unfairness) of what they are demanding. I think the Icelandic public is dead right about this. An obligation estimated at $65,000 per family of four is so onerous that it's really hard to imagine that any other consequences of refusal could be worse.
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