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Lewes and Iceland

 
 
On 9 Oct 2008 at 2:03pm Local wrote:
I see Lewes DC had a million pound invested in one of the Iceland banks that's gone down. Council leader Ann De Vecchi says (according to the BBC), 'The way we use investment interest and structure the council's finances means we can deal with this situation without it affecting council tax levels.' It'll be interesting to see. Meanwhile, what bright spark on the council missed this coming?
 
 
On 9 Oct 2008 at 2:41pm Cliffebimbo wrote:
Sorry, next time, shall we get our crystal balls out? Or maybe you have the number for Mystic Meg.
 
 
On 9 Oct 2008 at 2:48pm Local wrote:
Cliffebimbo: No crystal ball required. As long ago as March one commentator said the following: 'Things are looking pretty dire in Iceland. The small state with a population of only 313,000 people has been punching above its weight in global markets for several years. But the recent 'credit crunch' is having a massive impact on this economy and in the next few weeks we could witness the fall-out.
'Some commentators are now referring to Iceland as 'a Nordic hedge fund masquerading as a country'.
'Their currency, the Icelandic Krona, has fallen in value by 22% against the Euro since the start of this year. Earlier this week their central bank put up interest rates by 1.25% to 15% in an effort to prevent the currency from plummeting in value. They also have big problems with inflation. The inflation target in Iceland is 2.5% but the rate measured in February was 6.8%.
'Two of the largest Icelandic banks, Landsbanki and Kaupthing, are major players in the UK savings market. In fact, the Icesave account from Landsbanki frequently appears on 'best buy' comparison sites as offering a top interest rate.
'Our main concern is that the Icelandic government does not have sufficient resources to bail out their banks, which now have an asset base of eight times GDP.'
If I could read that surely someone in the council's finance department could.
 
 
On 9 Oct 2008 at 3:02pm Lewes Laugher wrote:
And don't forget Sussex Police Authority, which had 6.8 million invested with the Icelanders. Don't tell me that isn't going to find its way into the next council tax bill.
 
 
On 9 Oct 2008 at 3:16pm Taff wrote:
Ms De Vecchi is taking evasive action already. She actuaaly said ' I agree with the Local Government Association that it does not expect ..........'
so if they are wrong she will not be as she did not commit to the statement.
Does anyone recall whether the resultant profits or what they get used for, from these types of investments actually get publicised?
 
 
On 9 Oct 2008 at 3:24pm Local wrote:
Taff asks, 'Does anyone recall whether the resultant profits or what they get used for, from these types of investments actually get publicised?' That's an interesting question. Presumably any profits are used to keep council tax demands down. If so, then any losses would presumably have to be up through council tax. Perhaps one of the council press officers who keeps an eye on this forum could let us know.
 
 
On 9 Oct 2008 at 4:56pm Nosey Parker wrote:
I caught the end of a statement on the radio saying that council tax would not be affected "yet". Presumably large hikes next year.
I suggest we make cuts now to off set any increase - let's get rid of NCP for starters
 
 
On 9 Oct 2008 at 5:18pm zola wrote:
I'm a regular on Martin Lewis' Money Saving website. Iceland has always been their No.1 recommendation if you have any spare cash.The interest rates on saving with them are quite a bit higher...There are a lot of disgruntled savers out there you know.Martin looked sheepish I thought on GMTV yesterday...
 
 
On 9 Oct 2008 at 7:01pm MC wrote:
Martin & Lewes Council should have known. Have a look at Martin's forums. The alerts about the viability of the Iceland banks was there then.
The reason I know?
I opened an account with Kaipthung Edge (or whatever it is they're called) over 6 weeks ago (maybe more than two months).... but then heard on Martins website that there were doubts about the banks viability. I looked further and lo and behold... a lot of stuff about how dodgy they were, on lots of financial web sites. If I can find this stuff then Lewes Council's financial team can too. They are paid to do this sort of thing. I am not.
I hope IngDirect stay OK though as that is where I put the dosh in the end.... :-(
Anyway, Lewes Council raising the council tax rate could be the least of our worries.
 
 
On 9 Oct 2008 at 7:17pm Cliffebimbo wrote:
Taff, there are details in the annual Statement of Accounts, on the LDC website. As Zola says, the Icelandic banks have been in the best buy tables for at least the last couple of years. I believe that I am fairly prudent with my savings, but I have accounts with Icesave. I have been keeping a close eye on the current financial crisis, but at no time, did I have an inkling that this was going to happen. With regard to the Council, they have a list of approved lenders and as far as I am aware, there was no indication of problems.
 
 
On 9 Oct 2008 at 7:25pm Cliffebimbo wrote:
MC, I work in the finance department at LDC, and as I said in my previous post, the Icelandic banks were on an approved list of lenders (can I just say though, before you start jumping down my throat, I have nothing to do with the borrowing and lending.) Nobody foresaw this happening. Certainly, if I had had an inkling, I would have taken my money out. Perhaps you could have warned us all 6 weeks ago, and we wouldn't be in this mess.
 
 
On 9 Oct 2008 at 7:33pm Minty wrote:
MC and Local-any chance of letting me have the winning lottery numbers for this week. Thanks
 
 
On 9 Oct 2008 at 7:47pm SHS wrote:
As other posters have said, a bit of common sense and reading the newspapers would have indicated weeks ago that there was at least a strong possibility of this happening. On the radio at lunch time a govt chap said council tax would probably have to rise as a result of this - so more 'biting of the hand that feeds' (see the 45xx Meltdown thread). The govt is throwing our money away and pretty soon there will be none left.
 
 
On 9 Oct 2008 at 7:48pm SHS wrote:
As other posters have said, a bit of common sense and reading the newspapers would have indicated weeks ago that there was at least a strong possibility of this happening. On the radio at lunch time a govt chap said council tax would probably have to rise as a result of this - so more 'biting of the hand that feeds' (see the 45xx Meltdown thread). The govt is throwing our money away and pretty soon there will be none left.
 
 
On 9 Oct 2008 at 7:56pm MC wrote:
Anyone can research the Internet (apart from our Government it seems). Lots of small investors started to avoid the Icelandic banks quite some months ago. Crystal ball doesn't enter into it.
BTW. The man who runs my investment fund was warning about Northern Rock and HBOS 18 months ago too.
Lottery numbers.... isn't that a 14million to 1 bet?
 
 
On 9 Oct 2008 at 8:11pm Frak wrote:
It is not really biting the hand that feeds, it is more an error of judgement by local councils rather than government. The council with the largest amount in Icesave is barnet and they are tory.
 
 
On 10 Oct 2008 at 8:14am DYL wrote:
What I cannot understand is if there is this major credit crunch how some of you have so much money that you are searching out the best deals for your savings.
Obviously not everyone is affected.
 
 
On 10 Oct 2008 at 8:23am Taff wrote:
Cliffebimbo,
I do not regard having statements of accounts on their website as publicising. It only reaches a few on a website. Hard copy statements are needed for it to be available to all.
They may claim that gains from such investments as this reduce the councils overall bill and consequently our Council tax, however if ti fails then we are the ones who will have to divvy up extra next year. Win win for the council, additional sibsidies required from us.
 
 
On 10 Oct 2008 at 8:25am Taff wrote:
Personally speaking I preferred it when it was called Bejams!
 
 
On 10 Oct 2008 at 8:42am MC wrote:
DYL. The credit crunch is about borrowing..... I am of the old financial school.... i.e. it is wiser to save than to borrow....... however, looking at the current precarious state of our banks I am beginning to wonder if this was prudent after all.
 
 
On 10 Oct 2008 at 9:29am Sahka wrote:
I can accept that LDC is not responsible for the loss of a million pounds. What I cannot accept is Anne De Vecchi's silly and patronising comments. If she really does not understand that when a small Council like ours loses such a large sum, someone will pay for it at some point, and we are entitled to know who is going to be affected. She has failed to grasp that the money lost is our money, not the Councils, and that she was elected to represent our interests, not to act politically as a 'bad news suppressor' in the misguided belief that ignorance is bliss.
 
 
On 10 Oct 2008 at 9:43am sashimi wrote:
If you lend money to any bank, you are taking a very small risk that you won't be able to get your money back. If you elect to get a better rate that risk must rise. Why else would a borrower have to pay more for money than a mainstream High Street bank? Cliffebimbo, the money that LDC (and Sussex Police) have lost is our money held in trust by them. It may be a mitigating circumstance that some wonk in Whitehall put Icesave on a list and didn't take it off - but it's not an excuse. Government isn't just shunting pieces of paper around. It requires those who exercise it to make decisions based on common sense. There were plenty of commentators querying the viability of the Icelandic banks and the Iceland Government's guarantee for deposits works out at 60,000 per person in a population of 300,000. It doesn't take a PhD in economics to see that this doesn't add up.
 
 
On 10 Oct 2008 at 12:15pm SG wrote:
I believe LDC has made a gross error of judgment. The fact that Icelandic banks should not have been regarded as 100% and the complicated regulation was being talked about at the time (and before) of the Northern Rock failure. That was a year ago. I think the council should be ashamed of itself. It is not an excuse to say 'we were advised' - there is too much of that shoving off responsibility these days.
 
 
On 10 Oct 2008 at 1:16pm Cliffebimbo wrote:
If the Council did not invest you would all be complaining that your money is doing nothing. The Council is only allowed to invest in those lenders stated as being safe, and it was not downgraded until 7th October.
 
 
On 10 Oct 2008 at 2:33pm DFL BLI wrote:
I am sure the LDC will be ok they can just print some more money
 
 
On 10 Oct 2008 at 2:53pm SHS wrote:
Who pays? We do. Following on from MC's comment, I wonder how much of our taxes just goes on paying the interest on the money the govt has borrowed. Now 39xx, only a little more than half the value of one year ago.
 
 
On 10 Oct 2008 at 5:05pm Toque wrote:
Dear Lewes District Council,
Can you explain to me why this investment was allowed to remain in Iceland
when alarm bells have been ringing since August 2007, about the instability of the Icelandic Banks, and again as recently as May 2008 when these banks were being down graded.
We have been down this route before with BCCI, when the Western Isles lost
30M, and the best that they got was a thirty year loan with interest from central Government. There is little point all the local authorities appealing to central Government for a bailout from us the taxpayer, to replace our money as Ratepayers that your Authority has lost in a reckless investment.
I would like a full and dated explanation from yourself and the Chief Financial Officer within the next seven days as to the following-
- When was this investment made
- Why was it made, on whose recommendation and what independent advice was sought.
- What checks were made on the credit worthiness of Landsbanki at the time
- What monitoring was made on this investment considering the warnings
that were being put out in August 2007, and the later downgrading to BBB+
- When was the Authority first aware that Landsbanki were in financial
trouble and what steps did you take to protect the ratepayers funds.
I do not wish to hear that you are making appeals to Whitehall, the officers and Councillors are legally responsible for this money, not Whitehall.
This is an appalling state of affairs considering that the Local Authority has the right to extract this money from our pockets with the sanction of penal action if we do not pay and to find this level of incompetence within your Finance department.
If I do not receive a detailed explanation with seven days, as who is responsible and what disciplinary steps are going to be taken, as there most certainly would be in a private enterprise, I will apply for this information with an application under the Freedom of Information Act and ensure that this goes to press. For far too long have we had to put up with this lack of accountability at all tiers of Government.
I look forward to receiving your acknowledgement and your detailed reply.
 
 
On 10 Oct 2008 at 7:14pm MC wrote:
Shouldn't you send that to them?
 
 
On 10 Oct 2008 at 7:26pm Disgusted, but not surprised! wrote:
Sadly I'm not surprised that stupid irresponsible decisions have been made and our money lost.
That money should have never left UK shores, it was the council's duty to invest it responsibly - high yield, risky foriegn banks should have never been thought a suitable place for it to be kept!
Those of you that work for the council are misguided in your defence - I would be surprised if your irresponsible employers will be looking to make redundancies as a result of this.
 
 
On 10 Oct 2008 at 7:27pm Disgusted... wrote:
Sorry that should have said I wouldn't be surprised if there are redundancies....
 
 
On 10 Oct 2008 at 8:22pm Local wrote:
And for all those who say 'How could Lewes have known?' there is this report in today's Argus:
'Brighton and Hove City Council said it was able to predict the demise of Icelands banks. City councillor Jan Young said: We suspended transactions with the one we had on our books about a year ago after picking up concerns in the marketplace about Icelandic banks expanding too quickly.'
So Lewes DC needs to tell us (and it is our money) why couldn't they see the signs when Brighton could?
 
 
On 10 Oct 2008 at 9:02pm Toque wrote:
I did.
 
 
On 11 Oct 2008 at 8:40am terry Lesser wrote:
My favourite definition of a politician is 'an elected representative who works tirelessly to keep their job' If it is true that the purpose of LDCs investment in Icesave
was to produce interest to suppress Council tax then the choice was politcal. Lower council tax is a vote generating tool as we know. Consequently councillors decision to invest in this high risk product was to secure votes and their jobs. Let me reiterate the obvious - the higher the rate of return the higher the risk. When politicians are thinking of their jobs they are blind to everything else including the security of investments. As far as Ms De Vecci is concerned I am bemused that anyone in the district is surprised by her response. It is commonly known that she is as slippery as an eel.
 
 
On 11 Oct 2008 at 1:59pm Toque wrote:
The word politics is derived from the word poly, meaning many, and the word ticks, meaning blood sucking parasites.
 
 
On 11 Oct 2008 at 3:32pm Annette Curtin-Twitcher wrote:
There have rumblings about the solvency of the Iceland economy for some time now. Unfortunately, I only ever read Heat magazine, so I thought it was something to do with Kerry Katona's troubles with the tax man.
 
 
On 11 Oct 2008 at 6:46pm An Economist wrote:
There is a nice summary of the Icelandic banking system here:
www.thedailymash.co.uk/news/war/councils-invested-%a31bn-in-tiny-volcano-surrounded-by-fish-200810101314/
And of Darling's bail out here:
www.thedailymash.co.uk/news/business/banks-to-lend-you-your-own-money-200810081308/
 
 
On 11 Oct 2008 at 6:49pm An Economist wrote:
Oh, and there's a bit more here:
www.thedailymash.co.uk/news/business/does-alistair-darling-have-what-it-takes-to-run-seventeen-banks-at-once?-200810091311/
The Daily Mash provides about the best daily summary of the ongoing credit crunch online, and for free ;-).
 
 
On 12 Oct 2008 at 6:32pm MC wrote:
Thank you, thank you, thank you.
This DailyMash thing is great.
How can you not giggle at news titles such as:
"CARNAGE AS FACEBOOK MOVES EVERYTHING SLIGHTLY TO THE LEFT!
Brilliant.
 
 
On 13 Oct 2008 at 10:41am Local wrote:
Bad news for Lewes DC on Radio 4 this morning - the Lib Dems treasury spokesman in the Lords said that any local authority that kept investing in Icelandic banks had been irresponisble and should have seen the way things are going. He said that blaiming the Treasury cut no ice and that they were personally responsibile. Lewes DC are, of course, Lb Dems. Let's hope they've got their explanation ready.
 
 
On 13 Oct 2008 at 10:48am Taff wrote:
I am sure they have a dodge already.
 
 
On 13 Oct 2008 at 7:00pm Frank Keys wrote:
Can those of you who had specifically predicted this banking collapses please give me a timetable of what else will collapse this year and when so I know what to do with my deposits. Thanks
 
 
On 13 Oct 2008 at 8:00pm An Economist wrote:
Frank Keys. I for one am not claiming to have 20-20 hindsight. However, as a practical and some might say cautious individual, I would not have felt comfortable putting my money in a bank that was offering to pay something approaching 7% on sterling deposits when the base rate was only 5% and most banks were paying nearer to 4% at best. I would have smelt a rat. You do not get something for nothing in this life, particularly where finance is concerned.
LDC should have asked themselves why the Icelandic banks could afford to be so generous. The reason is that they had to be - they had a business model that was risky to say the least. They were lending Icelandic Krona at a rate of 15% to Icelanders and funding much of this by taking in Sterling deposits from the likes of us at a rate of 6%-7%. Bit of a clever wheeze, assuming that their exchange rate does not move, or better still goes up. When it falls more than 50% in a couple of days, suddenly the books no longer balance - they owe far more in Icelandic Krona terms to the rest of the world than they have lent out to their own citizens - and it is game over.
 
 
On 13 Oct 2008 at 8:08pm Local wrote:
Frank Keys is purposely missing the point - the evidence about Iceland was there and commentators were pointing it out. No crystal ball was required.
 
 
On 14 Oct 2008 at 9:49am Frank Keys wrote:
I'm not purposely missing the point. I disagree with your analysis that it was very clear that the Icelandic banks would fail. It is very clear now to see why they failed, as it is with all the other banks that have pursued risky strategies, but if those of you who think the collapse of the Icelandic banks was obvious, prove your point by giving me an example of the next one that is going to collapse and we can check back in a month or so to see if you are right. If it was obvious, why would so many people who specialise in making money have lost so much money (not just councils). Some commentators warned about it, others said it was still a good investment. Everyone can have 20-20 hindsight, but predicting the financial future is pretty difficult.
 
 
On 14 Oct 2008 at 10:54am Local wrote:
So what Frank Keys is saying is that it was reasonable of Lewes DC to have lost a million pound of our money. Let's hope it won't come to that.
 
 
On 14 Oct 2008 at 12:07pm Sawyer wrote:
Have any of you bothered to find out how much money has been earnt on investments that LDC have made?
 
 
On 14 Oct 2008 at 12:20pm Taff wrote:
I asked that 'n' posts ago. I dont think it is made public.
Convenient!
 
 
On 14 Oct 2008 at 12:50pm Cliffebimbo wrote:
Taff, I told you in a previous post that the Council has an Annual Statement of accounts which is available online. You can also get a copy from Southover House.
 
 
On 14 Oct 2008 at 12:59pm Taff wrote:
Sorry Cliffebimbo you did. Its my age!
 
 
On 14 Oct 2008 at 5:44pm The Mise(r) of Lewes wrote:
Did the Icelandic banks invest in the Lewes pound?
 
 
On 15 Oct 2008 at 2:51pm Toque wrote:
Apparently our councils have been encouraged to speculate with taxpayers' money by the Government.
www.tinyurl.com/45293u
 
 
On 1 Feb 2009 at 1:40am KPW wrote:
Is it a case of people meddling with the markets who don't really know or understand them fully? Anyway, what is the risk? It is only public money and there is plenty more where that came from!


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