Alistair Darling´s legacy

The famous misunderstanding between Alistair Darling and Árni Matthiesen during the economic crash here in Iceland, a week after the Lehman Brothers bank fell, is legendary. The misunderstanding between Matthiesen and Darling resulted in the British government using the infamous anti-terrorist laws on Landsbanki and severely damaging trade of Icelandic companies with the rest of the world.

The result was a massive blow to the Icelandic economy and to Icelandic companies. This is now called the IceSave crisis. The injunction was perhaps justified up to a point, but Darling claimed that Iceland would not pay its debts. The transcripts of the conversation between the two ministers show otherwise.

There have been various explanations put forward about this misunderstanding. One is that this was the result of the Lehman Brothers bank collapse a week before, to stop the massive flow of cash out of Landsbanki, just like what happened with Lehman Bros.

Some say this was an internal matter of the UK domiestic politics, and it was Gordon Brown’s way of showing “military” strenght. Something that has hit a strong patriotic nerve with Britain for centuries.

Then others claim this was just a massive communications failure and that the UK government, in a state of panic, put the laws in place.

Then this article shows up in the Finacial Times, (article may be closed if you are not registered) by Hank Poulson, the former US Secretary of the Treasury and CEO of Goldman Sachs. Here below is a part of the article:

It seems that Darling has some serious trouble getting his messages across and understanding others as well.

According to this article below, it could be argued that he is responsible for the fall of Landsbanki and the massive implications it has for the Icelandic taxpayer and the fall of the Lehman Brothers bank as well.

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Article starts:

Separately, Mr Paulson makes it clear that he believes that Mr Darling prevented a takeover of Lehman by Barclays out of fear that it would endanger the UK bank.

Mr Paulson said that Mr Darling telephoned him on Friday September 12 – as the US authorities were scrambling to find a buyer for Lehman – to express concern about a possible Barclays deal. Mr Paulson said that he did not realise at the time that this was a “clear warning”.

He was stunned to discover on Sunday September 14 that the UK Financial Services Authority would not approve the merger on an accelerated timetable or waive the requirement for a shareholder vote.

Tim Geithner, then president of the New York Fed, called Callum McCarthy, the head of the UK’s Financial Services Authority, to ask him to waive the vote requirement.

“But the FSA chief put the onus on Darling, saying that only the chancellor of the exchequer had the authority to do that,” Mr Paulson said.

He said that Mr Darling “made it clear, without a hint of apology in his voice, that there was no way Barclays would buy Lehman”. Lehman filed for bankruptcy the next day.

Article ends.

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