moral hazard

UPDATE at 18.53: Icelandic timeline

UPDATE at 17.23: The Icelandic President talks to Newsnight

An avoidance of responsibility, or democracy in action? Analysis of the Icelandic President’s declaration to the people suggests the latter, with the words “people”, “passed”, “referendum” and “nation” occurring frequently. Conversely, the terms “international”, “British”, “Dutch” and indeed “Icesave” are rare.

The President has vetoed a second round of legislation to repay British and Dutch governments for their (advance) reimbursements to Icesave account holders in their countries. (NB. Terms had largely been agreed on 5 June, 2009, under which the Icelandic Guarantee Fund would repay depositors €20,887.) The President has asked for a referendum on the issue, saying: “The people are the supreme judge of the validity of the law”.

This is perhaps unsurprising. But three things stand out. Read more

While we are doing anniversaries, it is two years since Mervyn King launched a tirade against moral hazard and bailing out bankers. He had to do it all the same. But his words sound better two years on when we are thinking about devising a new and safer banking system. Read more