by Calculated Risk on 12/01/2007 11:23:00 PM

Update: here is an article from Aftenposten in Norway (sent to me two weeks ago, hat tip Impy): Townships caught up in international credit crisis

Officials in four northern Norwegian townships (Narvik, Rana, Hemnes and Hattfjelldal) went along with an alleged recommendation by Terra Securities to invest a total of NOK 451 million in what they're now calling "high-risk structured products" offered by Citibank and sold for Citibank by Terra.

The American commercial paper was also tied to bonds issued by local governments in the US, and Norwegian Broadcasting (NRK) reported that hedge funds were involved. To boost returns, the Norwegian townships also borrowed NOK 3.5 billion to invest in Citibank's products, which later lost as much as 50 percent of their value because of the US credit crunch.

News started leaking out about the troubled investments when the townships were ordered to pay in millions more, to satisfy guarantee requirements. Mayor Asgeir Almås in Hattfjelldal feels cheated.

From the NY Times: U.S. Credit Crisis Adds to Gloom in Arctic Norway

What is keeping [Karen Margrethe Kuvaas] awake are the far-reaching ripple effects of the troubled housing market in sunny Florida, California and other parts of the United States.

Ms. Kuvaas is the mayor of Narvik, a remote seaport where the season’s perpetual gloom deepened even further in recent days after news that the town — along with three other Norwegian municipalities — had lost about $64 million, and potentially much more, in complex securities investments that went sour.

Tanta and I (and many others) have been wondering for a couple of years who the bagholders would be. Add Narvik, Norway to the list.