Local mayors and politicians were sounding more optimistic, after news broke over the weekend that Terra had sold them investment products that are illegal to market in Norway.
Terra's products involved a Citigroup hedge fund, "Citigroup Municipal Investors." "It’s not legal to market hedge funds in Norway," Eystein Kleven of the regulatory agency Kredittilsynet (Norway's equivalent of the US Securities and Exchange Commission) told newspaper Aftenposten
Terra sold the complicated American investment product to several small Norwegian townships flush with energy revenues. The high-risk products required the townships to take on debt, secured by future energy revenues, and they soured amidst the US credit crunch. The townships were ordered to pay in more funds to honor guarantees, and face losing their investments.
So acute is the funding squeeze that some towns, like Narvik, couldn't meet payroll for December. Cuts in everything from education to child care programs to elder care and holiday Christmas parties loom.
Terra was supposed to meet with Haugesund township officials on Monday, but cancelled and went into a meeting of its own. Citigroup officials also reportedly arrived in Oslo to meet with Terra in an effort to find a solution to the crisis.
The politicians, mostly all from the Labour Party, were on the offensive, blaming the entire crisis on Terra. They claim they weren't informed about all the risks tied to the investments.
Moreover, they're demanding immediate withdrawal from hedge fund products and that Terra compensate them in full for any losses.
Meanwhile, the city and county of Oslo was enjoying a new top credit rating of its own. Rating bureau Moody's joined Standard & Poor's in granting Oslo a triple-A rating, based on its solid budget, strong financial position and low debt rate.
