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I'm a native of Iceland. There are mixed feelings with respect to the sentences. We are generally proud to have a system that does imprison bankers but there are frustrations that the true architects of the financial crisis not only got off scot free but also with a substantial portion of the loot scurried away on Tortola. There has been substantial revisionist history practiced by the guilty and their defenders and the more time passes since the crash the fuzzier memory becomes. After all the electorate voted the parties that were largely responsible for the system that crashed back into power.

I'll answer any questions that you would be curious about local sentiment and coverage.

EDIT: Having finally gotten to a copy of the article I want to point out several factual statements in the article that I find a little bit challenging to agree with.

1. Iceland let the banks fail.

Not really. It was a restructuring. In the restructure a holding company handed all the assets over to a new corporate entity. All debts and obligations were honored.

2. Iceland avoided austerity

Many social programs were cut. Great cutdowns in the healthcare system, so much so it is on the verge of collapse now.

3. Geothermal is clean energy

Ask anyone from Reykjavík. Silver can no longer be kept without wrapping it in cloths, otherwise it goes dark in a day due to the hydrogen sulfide pollution. It's also not renewable. You can farm the area for about fifty years before it's too cold to extract and then it takes a millennia to recover.

4. Value of ISK/EUR

That may be the artificial value while capital controls are in effect. True value is way below that. I might cover the "snowhenge" problem later, it's a doozy.

5. Quoting the President on the banks.

You would have to know how much of a fluffer for the banks the president was for the banks and the oligarchs before the crash to know how stinky that sounds to an Icelander.

>> 1. Iceland let the banks fail.

> Not really. It was a restructuring. In the restructure a holding company handed all the assets over to a new corporate entity. All debts and obligations were honored.

Iceland refused to bail out the banks. Doing so would have mathematically impossible. The banks failed to honour their financial obligations, and Iceland did not repay the depositors of said banks when the savings accounts were closed.

From the Executive Summary of the Report of the Special Investigation Commission (at http://www.rna.is/eldri-nefndir/addragandi-og-orsakir-falls-...):

> After the collapse of Lehman Brothers, the government’s takeover of Glitnir and the lowering of Glitnir’s credit rating, it was very unlikely that these collateralised loans would be refinanced. It was absolutely impossible for the Icelandic state to meet payments on the aforementioned claims. The government was not able to secure loans in the international finance markets. In the evening of 7 October 2008, the FME decided, on the basis of Emergency Act (Act No. 125/2008), that a special resolution committee take control of Glitnir.

> Shortly after the collapse of the banks in November 2008, an appraisal was carried out of the value of their assets. The results of the asset valuation showed 40% of the booked value at the time when the banks collapsed. The difference amounts to over ISK 7,000 billion

For the depositors, one can read about the lengthy considerations and ongoing Icesave dispute at https://en.wikipedia.org/wiki/Icesave_dispute

For what it is worth, I am a lawyer and recognized expert in sovereign insolvency, being the founder and an officer of a legal experts committee whose members include the counsel for Iceland's bondholders, the external counsel for Iceland for the crisis, the general counsel of the IMF and ECB and other central banks, among other experts. I am also friends with Gudrun Johnson, author of "Bringing down the Banking System", which I strongly encourage reading.

You are obviously an expert and know far more than I. I still think I do the situation more justice than the article. Taxpayer involvement got the new banks jumpstarted.

My respect for Iceland went up because of

"Iceland refused to bail out the banks."

Would you expect startup-ers to go to prison for having caused the dotcom crisis of 1999? People who did fraud went to prison. But it's not a crime to make bad business decisions. In fact right now, tech companies are red hot (a bit less since this summer). I am sure people will loose a lot of money on current valuations. Should the management teams of Tesla, Amazon or Jet.com go to prison for that?

If they artificially manipulated the stock themselves and hid their interest in the company to the degree where holdership limits were broken, yes.

You also have to realize what sort of lending put the banks under. Using their influence in the banks they directed the loan officers to make out unsecured loans to their own companies. That was a big part of the banks all failing simultaneously.

Exactly, but that's Enron style fraud. It's not fraud that caused the financial crisis. It is the excess of leverage, and the complacency in lending and the way balance sheets were funded. I am not saying it wasn't moronic, just not criminal.

There were rules that were supposed to prevent such overleveraging that they skirted by hiding their interest in the bank. The holding companies were so transparent about it that they had silly names like Drawercorp and (I shit you not) Twisty (The Icelandic name is Vafningur, it kinda translates)

> There were rules that were supposed to prevent such overleveraging that they skirted by hiding their interest in the bank.

To clarify, executives at Bank created a Holding Company. Bank lent Holding Company $100. Bank then sold Holding Company Bank stock for $100, thereby manufacturing $100 in "equity". This "equity" makes Bank's debt/equity, and other equity-based leverage ratios, look rosier than they are.

I recall a similar shit show going down around Karzai's cronies in Afghanistan.

>It's not fraud that caused the financial crisis.

Fraud wasn't the initial spark, but it was what turned the American 2008 housing market slump from a self contained bust into a global financial crisis.

That is simply wrong. The US housing bubble, while experiencing fraud at the margins, was neither a cause nor an effect of fraud. The bulk was really due to too much money chasing too few assets, and a bunch of foolish decisions made in good faith by both borrowers and lenders.

The idea that fraud lead a US housing bubble to cause a real estate bubble in the UK and Spain, and a banking crisis in Iceland and Ireland is just not correct.

>foolish decisions made in good faith by .... lenders

I'd dispute that. Often it was a smart and cynical decision by lenders to make bad loans, take the bonuses and commissions and leave the government and others to clean up the mess. If you were to pin the blame on one group I'd say it was mostly the governments fault for under regulating this stuff.

It's not gambling and failing - it's intentionally manipulating the market and betting against it. And YES I would expect people ESPECIALLY management to go to prison for that.

In many cases, Wall Street was selling toxic investments to pension funds and other investors knowing full well the investments were worthless and mis-marketed.

So yes, if Tesla sold a car full of explosives that was about to explode as soon as the passenger got in -- then indeed they should be prosecuted. Thankfully the technology industry typically does not act in such manner. Their "crime" is more over-enthusiasm and pushing the envelope of privacy violations.

See "Fabulous Fab": http://www.usatoday.com/story/money/business/2013/08/01/gold... See Goldman Synthetic CDOs: http://www.businessinsider.com/a-timeline-of-goldmans-abacus...

>But it's not a crime to make bad business decisions.

It is if that bad business decision is the decision to commit fraud.

Recklessness or negligence that results in harm to others, while not always criminal, is absolutely punishable. It's the whole basis of tort law.

Would you expect startup-ers to go to prison for having caused the dotcom crisis of 1999?

Because putting money in the bank is exactly like investing in speculative high-risk tech stocks.

>People who did fraud went to prison.

Not 1999, but during the 2006-08 iffy loans period, Alayne Fleischmann went whistle blower on some of the fraudsters at JP Morgan. None went to prison (or I think lost their bonuses). JP Morgan gave $9bn of it's shareholders money to the US Govt as settlement instead.


You are correct about jail time.

On a different note, nobody bailed out the dot coms.

Well, that's not remotely relevant.


Please don't do this here.

Who are the true architects according to you?

The real owners of the banks. One of them is actually in jail, Ólafur Ólafsson. Björgólfur Thór Björgólfsson and Jón Ásgeir Jóhannesson escaped mostly unscathed, at least compared to the rest of us.

What's the general sentiment after all the turmoil over the past few years? Are you better off now or situation is the same? Picture we get presented from Iceland is that you got rid off everything that was wrong and you're now on the way of prosperity, or already there. Something tells me that's not really the case.

The current administration is doing it's level best to use their time in power to serve their owners (donors) knowing they will not be in power after the next election. This involves lowering taxes, doing away with fees for fishing quota, changing the tax code to be flatter, selling public assets to cronies and the head-scratching propensity of the prime minister has for involving himself in minutia of regional planning of the capital and preservation of "monuments". The Pirate Party is polling at roughly 35% for almost a year now with less than 18 months till next election. The left-leaning parties have taken a shellacking and most on the left don't trust them after the terrible job they did last time around. There is a real thirst for a change in politics because there are many things rotten in the state of Iceland.

Sounds bleak, but still in turmoil. I keep seeing crap like this all the time: http://i.imgur.com/q3CJejw.jpg Iceland has become a token for lots of issues/agendas, but I've never heard from anyone Iceland what's the situation like at all.

I'd say the spirit of the images is right but the devil is in the details. We are still a very fortunate country. We are managing to stand up after a rough tumble. We also generally know how fortunate we are. The general feeling with respect to the refugee crisis is that harsh policy interpretations by the Directorate of Immigration are not in line with the national spirit of succor for the huddled masses. There have been some very dubious uses of the Dublin Regulation that usually cause outcries that we should help the less fortunate but rarely do those affairs end with the rejected application getting any review. We have a lot of work to do still.

Yet the politics still sound way better than almost anywhere else in the world.

I guess it's better in the sense that political winds are still shifting. We had the good fortune of voting in 3 members of the Pirate Party (out of a legislative body of 63 parliamentarians) and they have been phenomenally effective given they are in the minority delivering resolutions with cross-partisan consensus leading to legislation reform.

> All debts and obligations were honored

British depositors with banks such as Icesave were bailed out by the UK government. Apparently 85% has since been repaid from Iceland, but you maintain "All"?


The Icesave subsidiaries are a separate matter. As far as I understand it the carcasses of the banks paid the last payment not too long ago (about a month or so). I confess ignorance in the details.

Maybe, but at least someone higher up than a random loan officer was prosecuted.

Look at this site to get stories of what the banks are still getting away with: http://4closurefraud.org/

Would cryptocurrencies (Auroracoin/Bitcoin/etc.) have any relevance in a state with weak currency controls and artificially-inflated currency values?

ISK/BTC ratio has been severely inflated against USD/BTC or EUR/BTC.

> proud to have a system that does imprison bankers

I am somewhat puzzled by this sentiment that it is good to imprison bankers. That is by no means an Iceland-only thing, you can see it elsewhere as well. But I find that scary. People should go to jail simply because someone hates their jobs, legal ones?

I can fully understand that bankers, like everyone else, should go to jail when they commit fraud, insider trading or similar crimes. I understand that is what was done in Iceland.

But the discourse is usually about just being a banker is enough to warrant someone being hanged or sent to jail, with the being banker itself being a serious crime. It's a silly rhetoric trick that makes me suspicious of these prosecutions.

You take my words out of context. There are well publicized examples from the US where bankers did great harm and were let off due to being high earners. The case that jumps to mind is the hedge-fund manager that plowed down a surgeon on a bicycle. Banker was drunk, doctor was on his way home. Banker did not do a day in jail due to that harming his ability to financially remunerating the doctor. Banker didn't even get a spot on his record for the same reason.

I wasn't merely referring to your particular words but to a more general sentiment which is expressed in many meme posters that are shared on Facebook, etc.

Are there well publicized examples of US bankers who did crimes related to banking - not great harm but crimes - and were let off due to being high earners?

The example you mention above is nothing specific about bankers; it's a claim that a rich person gets off lightly because he can pay for the damages. In fact, related to this particular case, there is a claim that the banker was targeted by police because of his wealth, because other hit-and-run drivers have gotten off completely.


"But when she and others raised objections to the toxic loans, something odd started happening. The number-crunchers who had been complaining about the loans suddenly began changing their reports. The process she describes is strikingly similar to the way police obtain false confessions: The interrogator verbally abuses the target until he starts producing the desired answers. "What happened," Fleischmann says, "is the head diligence manager started yelling at his team, berating them, making them do reports over and over, keeping them late at night." Then the loans started clearing."

Said diligence manager got off. JP Morgan paid $9bn to settle and hush it up.


In other countries bankers don't go to jail when they commit fraud or other crimes.

Are there lots of good examples of fraud (not just claims, but actually in some way reasonably proven crimes) done by bankers where they're let off because they're bankers?

HSBC has been doing money laundry for years, billions of dollars... It is proven. http://www.rollingstone.com/politics/news/outrageous-hsbc-se...

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