What were they thinking?

Latest news is that local councils have more than GBP840 million stuck in Icelandic banks, over GBP 900 million if you count Transport of London and police authorities (see link: http://news.bbc.co.uk/2/hi/uk_news/politics/7660438.stm).

Incredible! What were they thinking?! No doubt they were advised by the UK Treasury, no less, to gain better returns on their surpluses. Furthermore, they were told that the Icelandic banks had double A rating, which is certainly true. So should be safe right?

But what happened to diversifying their risks?! Transport of London had GBP40 million in Icelandic banks - doesn't take a brain to figure out that it's a huge amount to put in one basket; well it could have been several Icelandic banks, but it's still one country!

Makes me wonder what sort of returns they were being offered; must have been so blindingly attractive that they were willing to overlook the risks of under-diversifying.

And now everyone is scrambling around looking for someone to blame.

UK govt freezes assets of Icelandic bank with anti-terrorist law; chastens them for not protecting depositors' money. Nicky thinks this is ridiculous, considering that it was the UK govt who allowed the Icelandic banks into the country to operate on their own terms under free market - so, no regulation.

Iceland govt is affronted to be treated so harshly while their economy crumbles around them. Councils demand the same protection afforded individual depositors, and point the finger at the government, saying, you told us to do it. And it goes round and round...

And it continues to unfold....