Hedge funds planned on a killing in Iceland. Iceland says, “Piss off!”

Tourists steaming in the Blue Lagoon

When Iceland’s banks failed in 2008 under $85 billion of debt, dozens of hedge funds flocked to the island betting they could make money buying up creditor claims. Five years later, they’re still waiting.

The firms, including Davidson Kempner Capital Management LLC and Taconic Capital Advisors LP, snapped up the claims on the lenders’ assets at prices far below face value. They were wagering, as they did when Lehman Brothers Holdings Inc. went bust, that they’d profit as markets recovered, bank assets were sold off and creditors repaid. Over the years, about 80 firms joined, including Paulson & Co., which had made more than $1 billion betting on Lehman claims…

What the investors, some of them managing more money than Iceland’s $14 billion economy, may not have factored in was the backlash in the country of 320,000 people against the speculative Wall Street culture that, in their view, helped cause the failures of Glitnir Bank hf, Kaupthing Bank hf and Landsbanki Islands hf. While Lehman has paid out more than $40 billion to claim holders in the past five years, the hedge funds have yet to get any distributions from the Icelandic banks’ estates. The government, elected in April on a platform that included providing mortgage debt relief to Icelanders, has proposed paying the funds only part of their claims and using the difference to finance its campaign promise…

Attacks on the country’s banks “give off an unpleasant odor of unscrupulous dealers who have decided to make a last stab at breaking down the Icelandic financial system,” Morgunbladid newspaper editor David Oddsson said at the central bank’s annual meeting. “They will not get away with it.”

Keep on rocking in the Free World. Especially when the center of that world apparently is Reykjavik.

2 thoughts on “Hedge funds planned on a killing in Iceland. Iceland says, “Piss off!”

  1. Borg óttans says:

    “Pirates Remain Largest Party in Iceland” http://icelandreview.com/news/2015/06/25/pirates-remain-largest-party-iceland
    “We, the people, are the system,” Píratar’s leader Birgitta Jónsdóttir began in a recent TEDx talk {see link} earlier this month, a remark evocative of the decentralized principles whose implications remain excluded from the Icelandic economy. http://cointelegraph.com/news/114667/icelands-pirate-party-tops-opinion-polls-leader-seeks-to-create-switzerland-of-bits
    “PM Says Pirate Party a Danger to Society” http://icelandreview.com/news/2015/06/26/pm-says-pirate-party-danger-society Prime “Minister Sigmundur Davíð Gunnlaugsson said in a feature interview in DV yesterday that if the Pirates receive 30-40 percent of votes in the next election, it would lead Icelandic society in a very different direction which would make it difficult to maintain the values we cherish and have been building on for decades. He believes it would be very worrying for society if a revolutionary party; a party with very unclear ideas on democracy; a party which wants to revolutionize the very pillars of society; attained influence. Luckily, he says, he doesn’t believe that is going to happen.”

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