People protested outside the Icelandic Parliament on Saturday as Icelanders headed to the polls to vote on a referendum to repay British and Dutch citizens for bailing out Icesave
NEW YORK (Fortune) — It’s time to start paying attention to the financial sinkhole that Iceland is trying to climb out of — the view from inside of it is eerily similar to our own.
An Icelandic savings bank, Icesave, had attracted billions in deposits from hundreds of thousands of British and Dutch citizens, due to the phenomenally high interest rates it offered. Icesave collapsed in 2008, for much the same reason Lehman Brothers, WaMu, and hundreds of local savings banks did: its bankers used their cash to make complicated, bad, leveraged investments, mostly on real estate.
The British and Dutch have made their citizens whole, bailing out Icesave after it became clear the Icelandic government didn’t have the resources to do the same.
Now, they expect to be repaid. But in a referendum there this past weekend,only 1.8% of voters favored a plan to pay back the $5.3 billion Iceland owes. It would have worked like this: the International Monetary Fund would loan Iceland the cash to pay back the British and Dutch. Iceland, then, would repay the IMF.
To call the rejected terms loan-sharking would be a disservice to usury. They called for every Icelandic family to essentially throw a quarter of its income towards servicing the loan for the next eight years. But this isn’t the end: one way or another, the bill will come due, and Iceland’s 320,000 citizens will be paying for the hubris of a few hundred of their own, who dubbed themselves “investment bankers.”
The amount owed — $5.3 billion — sounds like a rounding error to Americans, but, per capita, it would be the equivalent of the United States taking on a $5 trillion debt. Sounds impossible, until you consider that our real bailout tab, as calculated by the New York Times, is already $2 trillion. Moreover, the government has obligated itself to pay out $12.5 trillion if things get worse. In Vanity Fair last April, Michael Lewis wrote, “Iceland instantly became the only nation on earth that Americans could point to and say, ‘Well, at least we didn’t do that.’”
Yet in a pretty real way, we did do “that.” We have a more sophisticated central banking system, and there are more countries, like China, in whose interest it is to protect the value of the American dollar, thanks to their ownership of our national debt. In that crucial way, we’ve dodged Iceland’s true peril: watching the value of its currency, the króna, crash against the debt it owes in foreign currencies like the sterling and euro. It’s looking more and more like our craftiest bankers factored the inimitable strength and guarantee of the U.S. dollar into their reckless gambles.
But the rest of us are really just lucky that the dollar can survive these hurricane-level economic forces without blowing apart. One way or another, the bill is coming due, and America’s 300 million citizens will be paying for the hubris of a few thousand of their own, who dubbed themselves “investment bankers.”
While Lewis summons a gentle humor to chronicle a tiny nation’s transformation from European fishing capital to destroyer of capital markets, it’s worth remembering America’s Rube Goldberg financial machinery sprung from a society that was once far more concerned with agriculture (and later, manufacturing) than with inventing complicated and opaque ways to manufacture wealth.
It’s too easy and wrong to look at Iceland as being somehow dumber than we were. Their problems aren’t just an outgrowth of our financial handiwork; their problems are our financial handiwork. And Icelanders have thoroughly rejected being placed in hock to exonerate the tiny segment of the population that threw their country into chaos.
In our democracy, we didn’t have that choice. From Treasury Secretary Hank Paulson’s ramming of TARP through Congress, to Treasury Secretary Tim Geithner’s decision to abandon subtlety and mainline dollars into bank balance sheets, even our presidential election had little impact on our government’s deployment of huge amounts of capital to save our obese banking system.
Icelandic journalist Iris Erlingsdottir wrote in the Huffington Post, “While we have been endlessly debating IceSave, our unemployment rate has continued to climb, the number of insolvencies has continued to increase, and the number of public services has continued to decrease. Other scandals of comparable magnitude and abuse of taxpayer money — but involving only Icelanders — are being ignored by the Icelandic media.” Change a few nouns — health care, Citigroup (C, Fortune 500) — and Erlingsdottir is writing about Washington as Reykjavik.
Just because the crisis has been “managed” doesn’t mean it’s over. As economist Simon Johnson writes, “The true fiscal cost arising from our recent financial excesses is the increase in net government debt held by the private sector. This will likely amount to around 40 percentage points of GDP.” Servicing that debt will likely affect our promise as a nation, not for years, but decades.
Whatever settlement Icelanders finally swallow, their financial system, at its peak just a minor moon in the constellation, is already as barren as the island’s volcanic bedrock. But precious little has changed about Wall Street’s massive gravitational pull in the U.S. and the world.
Our banks are still too big to fail, their boards are still poorly composed, we have no Consumer Financial Protection Agency, no systemic regulator, no resolution authority, and no reform of mortgage securitization or ratings agencies, two of the institutions that most enabled the crisis to occur. We’ve been distracted from the task of preventing another crisis from happening by the task of minimizing the current one, and as a result, we’ve done neither, while allowing our other domestic problems to snowball.
In Iceland, it’s expected the ruling political party could be forced to step down if it can’t come up with a loan plan the public approves of. The closes thing the U.S. gets to a bailout referendum is the 2010 midterm election. It’s still unclear what happens to Iceland next, as it grapples with recovering from its terrible financial fever. But it might be time to stop treating Icelanders’ predicament as a sad footnote to the global crisis, and start searching for lessons on what, save massive structural reforms, is still in store for us.
KARACHI, Pakistan – The American-born spokesman for al-Qaida has been arrested by Pakistani intelligence officers in the southern city of Karachi, two officers and a government official said Sunday as video emerged of him urging U.S. Muslims to attack their own country.
This image from video released by IntelCenter Sunday, March 7, 2010, shows Adam Gadahn, featured in a video posted Sunday, coincidentally the day that his arrest by Pakistani intelligence officers in the southern city of Karachi was announced. In the video the 31-year-old American al-Qaida spokesman called for Muslim violence, praising the U.S. Army major charged with killing 13 people in Fort Hood, Texas, as a role model for other Muslims. (AP Photo/IntelCenter
The arrest of Adam Gadahn represents a major victory in the U.S.-led battle against al-Qaida and will be taken as a sign that Pakistan, criticized in the past for being an untrustworthy ally, is cooperating more fully with Washington. It follows the recent detentions of several Afghan Taliban commanders in Karachi, including the movement’s No. 2 commander.
U.S. officials did not immediately confirm Gadahn’s capture.
Gadahn has appeared in more than half a dozen al-Qaida videos, taunting and threatening the West and calling for its destruction. A U.S. court charged Gadahn with treason in 2006, making him the first American to face such a charge in more than 50 years.
He was arrested in the sprawling southern metropolis of Karachi in recent days, two officers who took part in the operation said. A senior government official also confirmed the arrest, but said it happened Sunday. The discrepancy could not immediately be resolved.
They spoke on condition of anonymity because they were not authorized to release the information.
The intelligence officials said Gadahn was being interrogated by Pakistani officials. Pakistani agents and those from the CIA work closely on some operations in Pakistan, but it was not clear if any Americans were involved in the operation or questioning.
In the past, Pakistan has handed over some al-Qaida suspects arrested on its soil to the United States.
Gadahn grew up on a goat farm in Riverside County, California, and converted to Islam at a mosque in nearby Orange County.
Adam Gadahn, seen in these undated file photos released by the FBI. The American-born Al-Qaida spokesman called on Muslims serving in the U.S. armed forces to emulate the Army major charged with killing 13 people in Fort Hood in a video posted on a radical Islamic web site on Sunday March 7, 2010. Gadahn, who was raised in California, describes Maj. Nidal Hasan as a pioneer who should serve as a role model for other Muslims. (AP Photo/photos released by the FBI, File)
He moved to Pakistan in 1998, according to the FBI, and is said to have attended an al-Qaida training camp six years later, serving as a translator and consultant. He has been wanted by the FBI since 2004, and there is a $1 million reward for information leading to his arrest or conviction.
The treason charge carries the death penalty if he is convicted. He was also charged with two counts of providing material support to a designated foreign terrorist organization.
The 31-year-old is known by various aliases including Yahya Majadin Adams and Azzam al-Amriki.
His most recent video was posted Sunday, praising the U.S. Army major charged with killing 13 people in Fort Hood, Texas, as a role model for other Muslims. The video released Sunday appeared to have been made after the end of the year, but it was unclear exactly when.
“You shouldn’t make the mistake of thinking that military bases are the only high-value targets in America and the West. On the contrary, there are countless other strategic places, institutions and installations which, by striking, the Muslim can do major damage,” Gadahn said, an assault rifle leaning up against a wall next to him.
Pakistan joined the U.S. fight against Islamist extremists following the Sept. 11, 2001, attacks, and several high-ranking al-Qaida and Taliban have been arrested. But critics have accused the country of not fully cracking down on militants, especially those who do not stage attacks in Pakistan, all the time while receiving billions of dollars in U.S. aid.
Osama bin Laden is believed to be hiding somewhere in the country, most likely close to the Afghan border.
Al-Qaida has used Gadahn as its chief English-speaking spokesman. In one video, he ceremoniously tore up his American passport. In another, he admitted his grandfather was Jewish, ridiculing him for his beliefs and calling for Palestinians to continue fighting Israel.
Dawud Walid, the executive director of the Michigan chapter of the Council on American-Islamic Relations in Southfield, Mich., condemned Gadahn’s call for violence, calling it a “desperate” attempt by Al-Qaida’s spokesman to provoke bloodshed within the U.S.
Walid, a Navy veteran, said Muslims have honorably served in the American military and will be unimpressed by al-Qaida’s message aimed at their ranks.
“We thoroughly repudiate and condemn his statement and what we believe are his failed attempts to incite loyal American Muslims in the military,” he said.
Imad Hamad, the senior national adviser for the American-Arab Anti-Discrimination Committee, based in Dearborn, Mich., condemned al-Qaida’s message and said it would have no impact on American Muslims.
“This a worthless rhetoric that is not going to have any effect on people’s and minds and hearts,” he said.
The last person in the U.S. convicted of treason was Tomoya Kawakita, a Japanese-American sentenced to death in 1952 for tormenting American prisoners of war during World War II. President Eisenhower later commuted his sentence to life imprisonment.
Gadahn was last known to be in Southern California in 1997 or 1998. His mother last spoke to him by phone in March 2001. At the time he was in Pakistan, working at a newspaper, and his wife was expecting a child.
Appearing in 2006, in a 48-minute video along with al-Qaida’s No. 2 leader, Ayman al-Zawahri, Gadahn called on his countrymen to convert to Islam and for U.S. soldiers to switch sides in the Iraq and Afghan wars.
(Corbis)
Armenian orphans in Constantinople, now known as Istanbul, board a ship bound for Greece. The ship was laid on during World War One by Near East Relief, an American charity
WASHINGTON — The House Foreign Affairs Committee voted narrowly on Thursday to condemn as genocide the mass killings of Armenians early in the last century, defying a last-minute plea from the Obama administration to forgo a vote that seemed sure to offend Ankara and jeopardize delicate efforts at Turkish-Armenian reconciliation.
The vote on the nonbinding resolution, a perennial point of friction addressing a dark, century-old chapter of Turkish history, was 23 to 22. A similar resolution passed by a slightly wider margin in 2007, but the Bush administration, fearful of losing Turkish cooperation over Iraq, lobbied forcefully to keep it from reaching the House floor. Whether this resolution will reach a floor vote remains unclear.
In Ankara, the office of Prime Minister Recep Tayyip Erdogan immediately issued a sharp rebuke. “We condemn this bill that denounces the Turkish nation of a crime that it has not committed,” said the statement. It said that Ambassador Namik Tan, who had only weeks ago taken up his post in Washington, was being recalled to Ankara, the Turkish capital, for consultations.
Historians say that as many as 1.5 million Armenians died amid the chaos and unrest surrounding World War I and the disintegration of the Ottoman Empire. Turkey denies, however, that this was a planned genocide, and had mounted a vigorous lobbying campaign against the resolution.
A White House spokesman, Mike Hammer, said Thursday that Mrs. Clinton had told Representative Howard L. Berman, the committee chairman, late Wednesday that a vote would be harmful, jeopardizing Turkish-Armenian reconciliation efforts that last year yielded two protocols aimed at a thawing of relations.
President Obama spoke to the President Abdullah Gul of Turkey on Wednesday to endorse the efforts at normalization with Armenia, said Philip J. Crowley, a State Department spokesman.
“We’ve pressed hard to see the progress that we’ve seen to date, and we certainly do not want to see that jeopardized,” he said.
The timing of the administration’s plea seemed to catch some committee members by surprise. Early in the meeting on Thursday, the ranking Republican member, Representative Ileana Ros-Lehtinen of Florida, declared that the administration had taken no position on the vote. But several minutes later she requested time to correct herself: an aide had handed her a wire-service story describing the administration’s newly announced opposition.
Suat Kiniklioglu, a Turkish member of Parliament in Washington to meet with lawmakers, said later that he thought the intervention by Mrs. Clinton — who was asked about the resolution last week before the same House committee but did not then condemn it explicitly — had come too late.
“It was done in a fashion to be able to allow this administration to say in future, when things go wrong, that they did intervene” in support of Turkey, he said.
Bryan Ardouny, executive director of the Armenian Assembly of America, also said he doubted Mrs. Clinton’s intervention changed much. He said of the vote: “It was closer than anticipated but at the end of the day the truth prevailed and the members made a very affirmative statement in the face of the opposition.”
Committee members were clearly torn between what they said was a moral obligation to condemn one of the darkest periods of the last century and the need to protect an ongoing relationship with a NATO partner vital to American regional and security interests, on issues from Afghanistan to Iran.
“This is not one of those issues that members of Congress look forward to voting on,” said Representative Gary L. Ackerman, Democrat of New York.
Like nearly every member, Mr. Berman saluted Turkey as an important ally. “Be that as it may,” he added, “nothing justifies Turkey’s turning a blind eye to the reality of the Armenian genocide.”
“The Turks say passing this resolution could have terrible consequences for our bilateral relationship,” Mr. Berman said. “But I believe that Turkey values its relations with the United States at least as much as we value our relations with Turkey.”
While still in the Senate, Mr. Obama had described the killings of Armenians at Ottoman hands as genocide. Mrs. Clinton, also then a senator, had taken a similar stance.
Last year, she strongly supported talks that led to two protocols between Turkey and Armenia calling for closer ties, open borders and the creation of a commission to examine the historical evidence in dispute.
Those accords, not yet ratified by either nation’s parliament, could now be endangered, opponents of the resolution said. “This is a fragile process that destabilizes the protocols,” said Representative Dan Burton, Republican of Indiana.
In Istanbul, Ozdem Sanberk of Global Political Trends Center at Istanbul Kultur University, agreed that the protocols would suffer. “With this result,” he said, “the effectiveness of the ethnic lobbies got maximized and American foreign policy got hurt.”
In 1915, the decaying Ottoman Empire launched a pogrom against eastern Turkey’s Armenian population, falsely accusing them of supporting a Russian invasion. Tens of thousands of men were shot and hundreds of thousands of women and children driven out of their homes and on forced marches towards Syria and Iraq. The death toll is estimated to have been a million people.
It was also one of the century’s first atrocities to be photographically covered; there are anonymous photographs and there are signed and documented photographs that corroborated witness accounts. A German military officer Armin T. Wegner, stationed with the 6th Ottoman Army, took a series of photographs of dying and dead Armenians. These pictures anticipates photographs that were to follow during the Second World War, and in the Killing Fields of Cambodia.
In fact, the international nonchalance over the Armenian genocide emboldened Hitler. In his August 1939, he spoke “Who after all is today speaking of the destruction of the Armenians?” in an haunting harbinger of his own Holocaust. “The world believes only in success,” he added, justifying his potential invasion of Poland and all the deeds that would follow that calamitous event.
Federal regulators said Wednesday that they had received 10 reports of Toyota vehicles accelerating unexpectedly after they were repaired at dealerships.
The complaints have not been verified, but they add to questions about whether Toyota’s big recalls will resolve its problems with unexpected
“If Toyota owners are still experiencing sudden acceleration incidents after taking their cars to the dealership, we want to know about it,” the agency’s administrator, David Strickland, said in a statement.
Toyota said its United States dealerships had repaired more than a million vehicles since early February out of six million vehicles that have been recalled to fix problems with the accelerator pedal. More than two million vehicles in other countries have also been recalled.
In some cases, Toyota says the accelerator pedal can become hard to depress or stuck partly depressed, and in others the pedal could become trapped under the floor mat, causing the vehicle to speed out of the driver’s control.
“We are confident that Toyota vehicles are safe, and we’re doing everything we can to ensure that our customers are satisfied with the rigorously tested recall remedies,” Brian R. Lyons, a Toyota spokesman, said in an e-mail message. “We are taking steps to quickly investigate these complaints.”
Several of the new complaints about problems in cars that have been repaired involve Camry sedans. The owner of a 2009 Camry said that on Feb. 25, two days after the car received the recall repair, it suddenly sped up and went into a ditch. The owner of a 2010 Camry repaired Feb. 12 wrote that the car accelerated into a snow bank five days later. Both drivers said they had tried to brake, but were unable to stop the car before going off the road.
As of this week, regulators said they had received reports of 52 fatalities and 38 injuries in incidents said to have been caused by unexpected acceleration of a Toyota. Three-quarters of the incidents were reported in the last four months, since Toyota began recalling vehicles for possible pedal entrapment.
Toyota executives testified this week to a Senate panel investigating the recalls that they were confident, as they had said since the recalls began, that the problem was caused by either the pedal or floor mats and not by the vehicles’ electronic throttle control systems.
“I want to be absolutely clear: As a result of our extensive testing, we do not believe sudden unintended acceleration because of a defect in our E.T.C.S. has ever happened,” Takeshi Uchiyamada, an executive vice president for Toyota, said. But Mr. Uchiyamada said Toyota would “continue to search for any event in which such a failure could occur.”
The complaints about repaired cars were reported Wednesday by The Los Angeles Times, which was alerted to them by Safety Research and Strategies, a Massachusetts consulting firm that has been compiling reports of unexpected acceleration in Toyotas.
KARACHI, Pakistan – The American-born spokesman for al-Qaida has been arrested by Pakistani intelligence officers in the southern city of Karachi, two officers and a government official said Sunday as video emerged of him urging U.S. Muslims to attack their own country.
