Frozen Shitpile

by digby

It isn’t just Florida and it isn’t just the US. This fetid pile is even affecting people who live above the arctic circle in Scandinavia. And there’s not much they can do about it:

A ballooning financial crisis in northern Norway is making the days even darker and colder than normal at this time of year. It now seems unavoidable that four townships will have to log heavy losses on their highly unfortunate investment in Citibank products.

Politicians in charge of the townships of Narvik, Hemnes, Hattfjelldal and Rana keep trying to blame Oslo-based Terra Securities for selling them the Citibank products, claiming Terra failed to advise them of the risk involved. The politicians also keep hoping someone will bail them out, after the international credit crisis reached beyond the Arctic Circle and deep into local coffers.

But the chances of that became even slimmer late this week, after Citibank’s parent Citigroup shut down a hedge fund and sold off its assets at less than half the value they’d held when peddled to the townships earlier in the year. The sale probably means a loss of an estimated NOK 350 million to the townships.

They intend to file claims against Terra in the hope of recovering some of their money. But Terra’s bankruptcy earlier this week leaves the townships as unsecured creditors far down the list of other creditors deemed to have stronger claims for compensation.

Citibank, seen as the only player that earned any money on the soured deal through its fee income, has blamed the financial woes on “weak markets” that have hit investors all over the world. Citibank has claimed it fully communicated the risk of its products to Terra, which in turn sold them to the townships.

The townships are left holding the empty bag, and may be placed under public administration if they’re unable to pay for social services seen as essential.

Coming soon to a town or county near you.

Update: The NY Times also did a story on this a couple of days ago.

H/T to LM

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