Maurice Bedard at LoanSafe.org has a lovely article on the Icelandic banking industry:
Iceland just sentenced their 26th banker to prison for his part in the 2008 economic collapse. The charges ranged from breach of fiduciary duties to market manipulation to embezzlement. …
… Iceland is also noted for being one of the Nordic Socialist countries, complete with universal health care, free education and a lot other Tea Potty [sic] nightmares.
(h/t Ron Anderson)
Which is an interesting reference, because, as Emily Ekins at Reason.com documents, the Tea Party grew out of opposition to the bailout:
Republican members of Congress faced vehement opposition from grassroots conservatives and libertarians opposed to providing taxpayer money to private businesses. And many of these angry grassroots grew into the eventual tea party movement.
So what did happen in Iceland? Maurice:
When Iceland’s three major banks collapsed, it resulted in defaults totaling $114 billion in a country with agross domestic product (GDP) of only $19 billion. In October, 2008 the parliament passed emergency legislation to take over the domestic operations of the major banks and established new banks to handle them. They did not, however, take over any of the foreign assets or obligations. Those stayed with the original banks, right into bankruptcy.
They then brought charges against several banking executives for fraud and market manipulation, resulting in sentences ranging from four to five and a half years. As the special prosecutor said,
Why should we have a part of our society that is not being policed or without responsibility?
I suppose I’m a little confused as to the difference between takeover and bailout – the institution continues, if with a different name and face. On the other hand, I don’t advocate their destruction, as the impact on society would be incredibly negative.
Eventually, one could say the Icelandic approach was a balance between saving society pain and punishing criminal failure, while the American approach also preserved society, while paying off the bankers, the class that funded the politicians.
