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Was the government negligent in advice to local authority Treasury departments?

While the true extent to which local authorities are exposed to the Icelandic banking crash is only just starting to emerge it has been revealed that the government was warned back in July that there were issues with the Icelandic banking system. As credit ratings groups looked to lower there ratings it has been suggested that governmental advice was lax at best and negligent at worst. So what is the true story?

As the government and local authorities try to push the blame onto the credit ratings agencies the facts remain that Icelandic banks were offering a rate of interest which was far and beyond what UK banks were offering. As the old saying goes 'If it looks too good to be true, then it probably is', so why did the government and local authorities not use this old adage?

Whoever was to blame and who eventually takes the rap may be two separate parties but the bottom line is that having been caught out to the tune of £858 million of tax payer's money the authorities are now trying to pass this off as an irrelevance. If it was that irrelevant and there were no immediate plans to use it, why was it not returned to tax payers?

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