Iceland Sentences 26 Corrupt Bankers To 74 Years In Prison

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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.

When most people think of Iceland, they envision fire and ice. Major volcanoes and vast ice fields are abundant due to its position on the northern part of the Mid-Atlantic Ridge(A hot July day in Reykjavik is around 55 degrees.) However, 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 nightmares. Therefore, as you might imagine, they tend to view and react to economic situations slightly differently than the U.S.

When the banking induced “Great Recession of ’08” struck, Iceland’s economic hit was among the hardest. However, instead of rewarding fraudulent banking procedures with tons of bailout money, they took a different path.

Prior to the recession, Iceland had one of the more thriving economies in the world, in spite of the fact that their total population (327,000) wouldn’t even fill a mid-sized American city. When the recession struck, they were among the earliest and hardest hit. However, instead of running to the vaults to shower the banks with money, they let the banks fail. They also resisted traveling down the European/Republican austerity road. Instead, they kept their social programs intact at a time when they were most needed.

And, they sent fraudulent bankers to jail.

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?

In the U.S., we simply tapped a few wrists with small fines, that ended up being paid by their respective banks.(Can you say “got off scot free?”)

Sending the bank executives off to play rock hockey for a few years didn’t solve the problem, but it did send a message not to do that again.

At its worst, Icelandic currency, the Icelandic krona (ISK) was trading at around 250 ISK per Euro. In order to qualify for an IMF (International Monetary Fund) loan, Iceland raised interest rates to 18%, which, of course, attracted bank deposits. Iceland also received a $2.5 billion loan from Europe’s Nordic countries.

To power its recovery, Iceland utilized its natural advantages such as its clean, cheap geothermal energy to attract the tech industry. Icelandic commercial fishing remained strong and as the general world economy picked up, the tourist industry bloomed. The deeply depreciated krona also helped make Iceland and Icelandic products very attractive, economically.  On the banking front, they facilitated domestic debt restructuring and fiscal adjustments as conditions changed.

As to how it has all turned out, here’s what the International Monetary Fund Survey has to say about it:

Iceland has rebounded after the 2008/9 crisis and will soon surpass pre-crisis output levels with strong performance in tourism and fisheries. Debt ratios are on a downward path and balance sheets have broadly been restored. The financial sector is back on track though with some important items remaining on the docket.

As the above survey also states, Iceland is “the first 2008-10 crisis country in Europe to surpass its pre-crisis peak of economic output.”

The krona is now running 142 ISK per Euro(up from 290/1 in 2008) The 2014 inflation rate was 2.05%.(down from 12.59% in 2008) The wage indexis running at 190.9. (up from 132.8 in 2008)

Btw, they did all this while keeping their social welfare intact. (There goes another bagger day-dream.)

Iceland’s President, Olafur Ragnar Grimmson explained how the country managed to recover from the global financial disaster,

We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing in Europe.

When asked whether or not other countries, Europe in particular, would succeed with Iceland’s “let the banks fail” policy, President Grimmson gave his answer,

Why are the banks considered to be the holy churches of the modern economy? Why are private banks not like airlines and telecommunication companies and allowed to go bankrupt if they have been run in an irresponsible way? The theory that you have to bail out banks is a theory that you allow bankers enjoy for their own profit, their success, and then let ordinary people bear their failure through taxes and austerity. 
People in enlightened democracies are not going to accept that in the long run.


    Corrupt bankers deserve accountability and these crooked bankers are rightfully being placed into prison.

  • Aquifer

    “People in enlightened democracies are not going to accept that in the long run.”

    Well, so much for being an “enlightened democracy” …

  • Forrest Higgs

    Pretty poisonous bunch of comments about political matters having nothing to do with what is going on in Iceland.

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  • josephlogston

    How about the USA, none??

  • Laquisha

    US bankers were completely bailed out, paid themselves giant bonuses and went right back to rigging the market in their favor, all while Congress gleefully handed them more tax cuts, loopholes and goodies and lectured the American poor for being lazy, entitled moochers. That’s American business 101.

  • Johann Rauch

    Iceland is a “whiteness” country so arrests and convictions of this sort shouldn’t happen. Maybe they should be more progressive like Illinois or California where whiteness is not a corrupting behavior, right Rahm and Jerry?!?!

  • Lincoln

    this president knows what he is doing and who he works for

  • FarSide2012

    The 2008 crises was spawned by Goverment, not bankers. These guys are taking the blame for the politicians.

  • Divad_Yblik

    I don’t mind running across links to my post on other sites, but I am damned unhappy when there’s no link. I get paid for generated clicks and this is downright theft. DELETE THIS POST IMMEDIATELY!

  • Rubberman99

    What are their immigration policies? And do they need more top software engineers?

  • Mikhail Mukin

    lol – they certainly do… though the “top” engineers moved to US already…

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  • Roy Boss

    Iceland had an odd advantage compared to other countries. Its banks had many non performing loans, but the vast majority were in other countries and the banks main investors were in other countries. Therefore when they reneged on their debts the majority of the enforced bankruptcies were in other countries. This was hugely different from the UK situation where letting the banks go under would have bankrupted thousands of British businesses, forced thousands to lose their homes and destroyed small savers by the million. The British govts reaction was proportionate and sensible. Of course the Icelanders did a good job jailing bankers, but then they are not going to have an international banking industry that employs thousands of people into the future. So bully for the Icelanders , they could not afford to bail their banks out so they didn’t and let a whole lot of foreigners lose their money. The British govt spread the pain rather than send its finance sector and uts small businesses and savers down the drain. Plus, if the British had walked away from the bank collapse then the recession thus caused would be eyewatering as businesses with no liquidity went bust.

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  • Ke’vin Bowers

    time to lock up the asshole bankers here in the usa that took bail out money and gave themselves a big ass raise and then forgot how to do basic accounting!!
    also claimed that accounting is not an exact science, but not when I go in they want to know to the last penny!!

  • stoicmonkey

    The creators of EVE Online, I believe, are located there, and I know a few who moved from Boston to Iceland to work there. You should give them a call 🙂

  • Box1Car

    A major issue is “No one is held responsible or accountable for actions” from the Catholic Church to Banks to Gov’t SEC> Bush SEC removed 1937 Uptick Rule on 7/7/7 to “Trigger” onset of global socio-economic upheavals. w/in 2wks of its removal Bear Stearns began to unravel & rest is history> Its also why Mitt Romney refused to divulge tax returns as it’d show he converted all assets into cash before hsg bubble burst & wall street banksters SHORTED hsg mkt into the ditch> Greatest XFR of wealth since Louisiana Purchase
    Then Bush used US Treasury to “Bail Out” banks to avoid bankruptcy other-
    wise the SHORTS would not be “Paid Off”> Crime of the Century but in US
    NO ONE went to jail> What a bunch of Crapola’> “America” is a BIG FAT LIE

  • Steve 907

    And it took a lesbian Prime Minister to break up this good old boys criminal conspiracy.

  • I.A.M. European

    I’m pleased with the measures taken and with Iceland’s example to the western world. Excellent news and an excellent performance.

    Just one important (to Europeans at least) point I’d like to make, lest the average American be confused…

    “When asked whether or not other countries, Europe in particular, would succeed with Iceland’s “let the banks fail” policy, …”

    – Although this article acknowledges on the one hand that Iceland is a country within Europe, on the other it sews confusion (perhaps for the average American ignoramus who couldn’t care less about the big, wide world and with names similar to Ronald Rump?). To clarify: Europe is not “a country”. Please reassure any trumped-up politician with a ginger cat on his head, lest he, she or it be as confused as Grouch E. Geezr …

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