Buy the stock – get a loan – pay the bailout – watch the CEO laughing

by Carl Frederik Waage Beck on februar 5, 2009

The Danish FSA is currently looking into the case of Roskilde Bank which went backrupt in August 2008.
Niels Valentin Hansen acted as the CEO of Roskilde Bank before the books were opened and it became apparent to all that the bank was going to crash lest the Danish Central Bank step in.

“Red Banker” from Artworks by Carl Frederik Waage Beck

It has long been common practice in danish banks Including Roskilde Bank to offer favourable loans to clients who chose to invest by buying stock in the bank. This was a very nice way of propping up the share price of the bank, and the option-based compensation schemes offered to CEOs meant that this practice was obviously not frowned upon by the bank management.

January 18th saw the agreement of a new DKK 100 bn bank-bailout plan as well as a ban on any new stock-option schemes.
Yesterday, February 4th. Barack Obama signaled a similar move in Washington.

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