Quote:
Originally Posted by Dan02
Now maybe I'm confused as hell, but there IS a government backed program in both the US and Canada which guarantees minimum balances in both those countries and would cover it if the banks defaulted. In the US it's the FDIC which guarantees bank balances up to 250,000 per depositor per bank. In Canada it's the CDIC covers up to 100,000 per depositor per bank of most bank accounts in Canadian funds.
Assuming there is something similar in Iceland, yes sure as hell the government/people are on the hook for covering the minimum deposits.
Iceland was just lucky they are small/insignificant enough that what they did could effectively be ignored. If they were a economy which mattered, I think it would be a completely different story. If Canadian banks stiffed Americans of a few hundred billion, anyone wanna take a guess at what would happen?
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Which, as Thor noted, they are doing, in accordance with domestic law and their international obligations. (he knows more than I do about this, since he's actually in Iceland).
In your hypothetical, my guess is that there's sufficient comity between Canada and the U.S. that we would allow their U.S. creditors to execute against their domestic assets. You're suggesting that Canadian taxpayers would foot the bill, over and above the minimal indemnification offered by the CDIC? (Note that there is a massive difference between paying out a minimum deposit through a government-backed
insurance program and actually draining public coffers to cover the actual face-value debts of a bank that went under)
You're certainly entitled to that opinion--but for my part I rather doubt it. I take a different view of the "size" issue--I think that the UK creditors thought they could push Iceland around and recover their lost money from the taxpayer just because they're the big dogs of the North Atlantic. To achieve this, they've framed the issue as "Iceland" owes money to the "U.K." as though this were an international obligation taken on by the government of Iceland which it is now failing to honour. The problem is
that's not what happened--and that's really the only point I'm trying to make here.