Iceland bank thing

[tigerlily11]

I don't have a great interest or understanding about how these things work so can anyone explain why, when the authorities and other institutions are moaning that they have no money to do anything important they then suddenly have loads in this Icelandic bank?
Why were they keeping it there?
What was wrong with British banks?
And why tell the public when it comes to spending any of it, that they don't have it?
I have tried to read the reports on it but a lt are filled with jargon.
Thanks for your time.

[pug100]

All councils have a certain amount of surplus cash esp as it is only half way through the finanical year. This extra cash is invested and the interest earned is usually re-invested (the investment grows year by year earning more interest).
Take Kent cc for example they invested �40M which if you assume an average coucil tax of �1200 per household is only 33,333 households which is a tiny percentage of the overall income generated by all the households in Kent.

Like most people they put it there as the Icelandic banks were offering the most competitive interest rates on the market, much more than British institutions. Icesave for example was one of the accounts Martin Lewis from Money saving expert recommended.

What this all could mean is explained in detail here.

http://news.bbc.co.uk/1/hi/business/7625419.st m

A jargon buster is here it helps explain some of the wors and phrases used in the press and on tv.

http://news.bbc.co.uk/1/hi/magazine/7642138.st m

[tigerlily11]

Thank you Pug. That helps a bit.
I see why they would put it in the Icelandic bank if they are offering higher interest rates but why, when it comes to it are they always seem to bleat that they haven't enough money and thats why they need to put up counil tax rates.
Why as well are the ministers in Iceland saying its our fault?
Why would that be? It's not our fault intirely that the world in general is in recession.

[anotheoldgit]

It is no only Local Authorities who have stashed large sums of money in Iceland's banks. Some well known charities have large sums stashed away also.

I think that this is especially disgusting, when instead of lying idle in the banks, this money should be targeted straight to where the money is most urgently needed, medical research for example.

[tigerlily11]

You'd think so wouldn't you.

[pug100]

Medical research such as that carried out at Chrisites Hospital.

http://news.bbc.co.uk/1/hi/uk/7664734.stm

It's indeed a terrible thing to happen, but fund managers must have been aware of the potential risks investing in a foreign bank.

As for Icesave it looks a little bit better than it di on Wednesday.

http://news.bbc.co.uk/1/hi/uk_politics/7665451 .stm

[jno]

they can't always spend it the minute it arrives in the post. Like most of us, charities and councils spend on some things regularly but also have longer term plans for which they put money aside. They try to get the best return on it precisely so they won't have to demand more from contributors. Apparently when MPs raised the question of how sound Iceland's banks were the government in Reykjavik said that deposts were guaranteed. Now they're saying it's only deposits of native Icelanders. So those from Britain who put their money there seem to have been misled.

[spudqueen]

I used to work for a bank in central London and several national charities had their accounts at our branch. I was amazed at how much they had in savings accounts - yet they were still advertising for donations saying please help us to raise �XXXX - they had more than this in their account!

[socket2008]

I am very choosy about who I give to charity. I remember one major one had 300 million in its accounts which was quoted in its year end report. I politely told the lady collecting in my town to ..... off when she did her pleading act on me.

Clearly charities need to have some money in their accounts. Using every penny on a day to day basis isn't a good business idea. However, where I hear that charities have millions just sitting in their account they can whistle for it as far as l'm concerned, no matter what that charity is.

And as for those councils, many of them were told several times earlier in the year that investing in Iceland banks was unwise, yet they still did it.

One thing to come out of all of this is just how much money is left sitting in accounts by institutions who then plead the poverty act.

Even my local members club once had 100k in its account yet refused to lower membership/drink prices. It caused a lot of bad feeling and I subsequently did not renew my membership. I was delighted to learn recently they are now in receivership. Serves them right.

[terambulan]

I call it 'legal dishonesty'! Touch of 'Robin Hood' robbing the rich etc. To add insult, Russia is bailing Iceland out and will have a foothold on all our finances through the deal......we're really for it with USSR.....Ghastly Gordon doesn't know how to gell with Proud Putin!