Kaupthing was no sure thing

The Local is not responsible for the content of blog comments.

The shuttering of Kaupthing Edge, the Swedish subsidiary of Iceland’s recently nationalized Kaupthing bank, provides The Local’s David Landes with a chance to reflect on risk, rejection, and the price of education.

Like thousands of others living in Sweden, I found myself in a rather unlikely – not to mention uncomfortable – position last week.

I’d been rejected – and it was a kind of rejection for which I was patently unprepared.

Most of us have been conditioned to deal with rejections from jobs, lovers, or institutions of higher education. That doesn’t make such dismissals any easier, but at least there is a standard script with which we are all somewhat familiar and have acted out at least once in our lives.

“Thanks, but we’re not sure you’re the best fit for this organization…”

“I’m really sorry…seriously, it’s not you, it’s me…”

“There were a record number of applicants this year…”

And so on.

But for the children of America’s baby-boomers, how to deal with rejection from a bank was one lesson that didn’t receive a lot of attention.

And I’m not talking about having your mortgage application rejected (something which not quite enough of us experienced in recent years, it now seems).

No, what happened to me and other Kaupthing customers in Sweden last week was something else entirely and seemed to echo back to a bygone era marked by bread lines, bank runs, and bootlegging.

It’s one thing to be told by a bank that you don’t have what it takes to be their customer, but it’s quite another to have the bank tell you that it doesn’t have what it takes to be your bank.

In my world, which is admittedly a charmed and naïve one, banks don’t just go away.

Sure, they change names, owners, and the shade of carpet in their branch offices.

But they don’t go away.

That’s the stuff of grandpa’s exaggerated tales of a hard knock childhood, not something I’m supposed to hear about in an email.

Or so I thought until I went from being a Kaupthing Edge customer one day, to learning the next day that Kaupthing Edge in essence ceased to exist.

And while a text book for how to deal with such an event probably exists somewhere, I didn’t have it handy at 10.51am on October 9th when the letter of rejection landed in my inbox.

Speaking later to some of my Swedish friends, I realized that bank failure isn’t something hypothetical, but painfully real and still fresh in everyone’s mind.

Less than 20 years have passed since Sweden’s banking crisis, which means almost everyone over the age of 25 probably has some memory of it.

For Swedes under 40, bank failures happen almost as often as the Social Democrats lose power. It doesn’t happen every day, but it does happen, and the possibility is ever present.

To its credit, Kaupthing didn’t try to sugarcoat its “Dear John” email with the flowery language that betrays the sort of scheming calculation that leaves a bad taste in your mouth.

I couldn’t be too bitter, but it still hurt.

I had been flirting with this edgy Icelandic beauty of a bank ever since she caught my eye during an innocent spring stroll through Stureplan in Stockholm.

After months of hesitation, I finally took the plunge in early September and applied to open an account with this roaring rascal from Reykjavik.

Kaupthing’s first letter came a few days later and I was even more smitten. She told me more about how great we would be together, but I procrastinated further before taking the next step and really putting my money where my mouth was.

In the meantime, the US financial markets started to falter, and analysts began whispering that Europe should brace itself. I looked the other way.

Plus the threat of an imminent financial meltdown seemed so ephemeral; I doubt I would have seen it coming even if I’d been looking. And my relationship with Kaupthing was fresh and full of promise, like a warm spring morning as the sun dries the dew of freshly cut grass. The world felt awash with the possibilities presented by the promise of a 5.55 percent interest rate – plus easy withdrawals.

I couldn’t lose.

I went ahead and made my first transfer in early October, confident that I had taken a crucial next step toward a long and fulfilling future with Kaupthing.

Alas, my desire to make things work blinded me to the risks inherent in getting hot and heavy with something that was simply too good to be true.

By the time I realized the folly of my ways, it was too late.

Now a single entry in my bank account registry captures both the birth and unexpected death of my brief love affair with Kaupthing, serving more as a tombstone than the milestone I first thought it represented:

2008-10-06 Kaupthing 1000,00 kronor

While I know I shouldn’t blame myself for this failed relationship, the whole episode remains rather unnerving.

On the other hand, having had my money frozen in a failed bank has brought me closer to the many Swedes who have also had their banks go belly up. Nyamko Sabuni take note – suffering through a banking failure has been an excellent tool for giving me a greater appreciation for Swedish views on finance.

And the other thing I keep telling myself is that, even if Kaupthing breaks its final promise to return my money, I don’t stand to lose that much.

As an old Swedish friend of mine always says when things don’t turn out they way we expect, “that’s the price of education.”

And if 1,000 kronor is all I have to pay to be reminded there’s no such thing as a sure thing and that every investment carries a certain amount of risk, suddenly being rejected and abandoned by Kaupthing doesn’t seem like such a bad thing after all.

This entry was posted on Tuesday, October 14th, 2008 at 12:57 pm and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.