Of Horses And Indebted Men

Reykjavík was overcast and cold the morning of June 24. The lacklustre clouds covered everything beyond Harpa but relentless tourists continued to stream through downtown, gathering in pods on the Ingólfstorg square and in front of the Government Offices. It was an average day at best, until a man on a small rust coloured horse appeared between the statues of Hannes Hafstein and King Christian IX of Denmark, his arm extended, handing over the Icelandic constitution—perpetually gripping a framework for freedom.
The horseman dismounted and led the horse up the stairs to the door of the Government Office’s, where he was hoping to find Iceland’s newly elected Prime Minister, the thirty-eight-year-old Sigmundur Davíð Gunnlaugsson. Following the horseman, a poker-faced man in a red sweater filmed the scene on a cell phone. The three of them—horseman, horse, and cameraman—crowded onto the stoop and the horseman began to knock vigorously on the door. In the few minutes that he had planted himself there, the horseman, or more specifically, the horse, had drawn considerable attention. Tourists stopped to photograph and excitedly speculate. A British tour group clustered at the bottom of Laugavegur. “That’s the Prime Minister. He’s going out for a horseback ride,” said one of the women. Others in the group nodded and smiled. Then a police officer made his way to the door and took the reins of the horse while talking with the horseman. He stroked the horse’s face while three other cops came and escorted the horseman into the back of a police car.
The horseman, Friðrik Helgason, and his horse, Hera, a seventeen-year-old mare had ridden 12 km from Kópavogur that morning, navigating side paths, morning car traffic, before arriving to the horse-less city centre. The purpose of his journey? To deliver a letter, a garden weeder, which he explained in the letter was for Sigmundur Davíð to get rid of the weeds getting in the way of him keeping his promises, and a pair of scissors, so that the new PM could cut himself free from the bank-controlled puppet strings attached to his back. Broadly, it was a demonstration to remind Sigmundur Davíð of his campaign promise to bring debt reduction to homeowners. Narrowly, it was, in Friðrik’s mind, a last resort.
A sobering desperation
I met with Friðrik at Café Paris a few days after watching him be put in the back of a police car. He wasn’t arrested, just questioned in the police car and released on location. After that, a transport service brought a cart for Hera and Friðrik rode along. He was a polite, middle-aged man who liked horses and the countryside, and spoke better English than he thought he did. He ordered black coffee. Like many Icelanders, he had intense blue eyes, but they were marked by a sobering desperation.
“I have my horses, my small plot of land, and my motorcycle. That is what I have, and they want to take it away from me,” said Friðrik, who was laid off from his carpentry job in April of this year. In 2007, Friðrik and his wife bought an apartment in Kópavogur that cost 29 million ISK. They paid 8 million ISK and got a 21 million ISK loan from Arion banki. Friðrik expected that they would be able to pay off the 21 million ISK in five to six years, but the loan has now risen to 38 million ISK “because of inflation,” Friðrik said.
“I required assistance from the Debtors’ Ombudsman, but it seems the staff there isn’t working on my case on my behalf, but on the behalf of the creditors,” Friðrik wrote in his letter to the PM. In order the pay off the loan, the bank wants him to sell his eight horses, his land, and his motorcycle. He said it is very likely this would still leave him in debt. “Hera is a very good horse, she’s well bred, and worth a lot of money. There are people who want to buy her, but for a much less than she’s worth,” he said.
The epidemic of homeowner’s debt in Iceland post-crash was due in part to the privatisation of the country’s largest banks in 2003. The privatised banks began to compete with the state-run Housing Financial Fund on the housing mortgage market. The banks, willing to lend to nearly anyone, offered 90 percent loans and also competed amongst each other for the lowest interest rates. There were instances when some banks gave 100 percent loans.
Following the crash, it became clear that this was not a good idea, putting many in the position of not being able to make payments on their loan. Furthermore, because most mortgages are connected to the consumer price index, a rise in inflation means a rise in debt. “While rampant inflation would ordinarily cause inflation linked mortgage payments to rise sharply, these loans have additionally been engineered with graduating payments and negative amortization schedules, leading to compounding interest accrual and in the long run exponential growth of monthly payments. The ever increasing costs inevitably lead to a variety of economic calamities and human tragedy,” The Homes Association of Iceland explains on their site.
Will Sigmundur stand by his word?
Although Sigmundur Davíð was only elected Prime Minister at the end of April, Friðrik was not concerned that it was too early to push the new PM. “You who were elected to improve the situation, I encourage you wholeheartedly to keep your promises, as soon as possible, because the nation is about to crack from the burden. The ordinary people are about to give up,” Friðrik wrote in his letter. Friðrik is not amongst those who voted for him, but is still urging him to keep his promise to reduce taxes and relieve debt. “He made a promise before he was elected, and I’m telling him to keep it. I don’t think he’s going to keep it” Friðrik said over the rumble of Café Paris. He realised he was nearly yelling and receded, sipping his coffee.
In early June, Sigmundur Davíð announced his ten-step plan for debt relief, which sounds like the title of an exercise video or a self-help audiotape. “[It] includes preparation for general correction of debt, lowering the capital of indexed mortgages, the option of establishing a special debt correction fund if financing is slow and the introduction of a so-called key law,” the PM said in his official speech to the public last month.
And he’s paying for that with what money? He plans to do this by not paying back billions of ISK worth of assets owed to foreign creditors by Glitnir Bank, Kaupthing Bank, and Landsbanki Islands. So, as Friðrik asks for debt relief from Iceland, Iceland will ask for debt relief from the world, but there’s a lot of risk in telling foreign creditors that they won’t be getting their money back. “Iceland will be locking itself out of the international debt markets and reducing the country’s chances of raising investments,” said Danske Bank chief of emerging markets economist, Lars Christensen, in a statement for Bloomberg BusinessWeek. Nonetheless, Sigmundur has stated that he hopes negotiations regarding debt write-off from foreign lenders could begin this summer.
The key law
The part of the ten-step plan that caught Friðrik’s attention was the ‘key law.’ The basic premise of the ‘key law’ is that a homeowner who can’t pay off their housing loans has the option to turn over the keys to the lender and walk away debt-free. In Friðrik’s case, it sounds like a miracle. “All I want is to give them the key to the apartment and walk away, never to go back to the bank again. I already gave them 8 million ISK. So they can have that, and they can have the apartment,” he said. “That would leave me with my horses and my bike and my land.”
As our conversation moved from the Icelandic government to horses, Friðrik lightened up. He’d been riding since he was nine and identified wholeheartedly as a horseman. He kept pointing at the laptop on the table and saying, “I don’t know how to use this. I’m just a horseman. I’m just a horseman,” he smiled. The day after we met, Friðrik and his wife were leaving Reykjavík on a 130km horseback ride to their twenty hectares of land in east Iceland. “We are going to go out into the country to enjoy the nature and fresh air,” Friðrik said. He sat back in his chair for a moment and watched people busying themselves around the café. Friðrik told me the police took his letter and he didn’t think there was a chance it would make it to Sigmundur Davíð. “But I’m not angry at the police, the police are good people,” he said. He handed me an extra copy. The last sentence read:
If you use these tools and stick to the restoration and the justice you promised to bring about, you could become a national hero, even world famous.
With kindness and respect,
Friðrik Helgason
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Sidebar: The PM’s Ten Step Plan
By Tómas Gabríel Benjamin
The newly elected government made very big campaign promises about reducing mortgage debts, a topic that was on many Icelanders minds during the election.
From 2005 to 2009, the number of homes with negative equity almost quadrupled, and the housing debt of the nation went from 95% of GDP in 2005 to 135% in 2009. To tackle this, Prime Minister Sigmundur Davíð Gunnlaugsson has put forward a ten step plan to help families in need and get Iceland out of debt.
His solutions include establishing a corrections fund in case the government fails to recover debts from foreign funds, and engage in general correction of debts and mortgages. Financial institutions are also given an incentive to process recalculations of loans quickly.
Sigmundur made it a campaign promise of his to take immediate action on the big issues, and not form more committees.
The OECD, Central Bank of Iceland and Confederation of Icelandic Employers have all criticized the prime minister’s plan for general correction of debts. The CIE in particular deemed them irresponsible for the economy and national treasury.
His ten step plan is as follows:
1. A specialist committee is to implement methods to bring down principal on indexed mortgages. These suggestions are to be ready in November 2013.
2. An extensive evaluation of the pros and cons of establishing a special corrections fund for mortgages is to be established, with- possible implementations ready in November 2013.
3. To examine measures to enable indebted homeowners, whose collateral is worth less than the remainder of their mortgage, to free themselves off further payments without risking bankruptcy. Results are to be ready in September 2013.
4. A project management group is to be formed on the future of housing matters. Their suggestions are to be ready by the beginning of 2013.
5. The Supreme Court ruling loans tied to foreign currency as illegal is to be made into national law in the summer court of 2013.
6. A committee is to be formed about abolishing the indexation on consumer loans. Implementations and a time frame is to be ready by the end of 2013.
7. It is to be examined how individuals without property will be able to pay for bankruptcy proceedings. Suggestions are to be ready in September 2013.
8. A committee is to examine the possibility of fining financial institutions for delays in recalculating loans. Proposal is to be ready in August 2013.
9. Mortgage stamp duties to be reconsidered, with the aim of removing them for property purchases for private use. A bill to this effect is to be proposed in the autumn court of 2013.
10. The Statistics office of Iceland is to get clear authorization to collect information from financial companies with regards to the financial wellbeing of companies and homes. A bill to this effect is to be proposed in the summer court of 2013.
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See Also:
Man And Horse Attempt To Infiltrate Government Offices Or Something