What were they thinking?

It's staggering to behold the parade of UK investors who are still coming forward and admitting they stand to lose money as a result of the collapse of Iceland's banking system. (Or to put it another way, it's staggering to discover the lengths to which those banks went to fund themselves).

First we had the personal depositors in Icesave, Heritable and Kaupthing Edge, all of whom seem likely to get their money back eventually, probably at the expense of the British taxpayer. Then there were the dozens of local councils, hospital trusts, police authorities and what have you, who kept piling money into the Icelandic banks even though some of their smarter brethren had seen the writing on the wall months ago and brought their money home. The Government seems to think that these folk should have known better, and is resisting calls to compensate them.

Last week we started to hear tales of people who had seen fit to strap on another level of risk by investing in an Isle of Man sub of a UK sub of Kaupthing Bank. I've seen tales of woe of people with upwards of a million pounds invested in this way, and because the deals were placed in an insurance "wrapper", they may only ever see £50 of their money back. It's impossible not to feel sorry for these people, but at the same time you have to ask why they would think it wise to invest the bulk of their life savings in something that's so opaque, especially without deposit insurance.

And today we hear that the Barnsley Building Society had £10 million with one of the Icelandic banks, and has decided to sell itself to the Yorkshire Building Society in the best interest of its members. Those members, of course, won't be given any vote on the matter, any more, presumably, than they were consulted about putting the society's surplus funds into Iceland in the first place.

Predictably, the Barnsley's bosses are trying to dodge any blame: "The current exceptional situation in Iceland and the full extent of the repercussions were beyond anticipation," said its acting chief executive, Steve Mitchell. He's wrong about that, of course -- even the preternaturally useless ratings agencies were starting to fret about Iceland months ago.

So what were all of these people thinking? As Hank Paulson said of the whole credit mess, "there's plenty of blame to go round". However, in this particular case I think a special mention goes to those "best buy" lists that you find in the weekend papers. These were still touting Kaupthing and Heritable the day before the whole pack of cards collapsed. Last weekend those names were gone, but things like "ICICI Bank" and "Earl Shilton BS" featured prominently alongside the Nationwides and HSBCs of this world. I looked carefully for any warning about risks, credit ratings, deposit insurance coverage or anything of the sort, but there was none. These tables are based solely on price, making them virtually an inducement to the greedy or naive to gamble. Investing money is a big decision -- shouldn't the "quality" papers think twice about providing such incomplete advice to their readers?