Iceland – poster child for how to resolve a financial crisis
“You could safely say that Iceland holds the world record in household debt relief,” said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.”
Note the words I bolded in the above: household debt relief, and not too-big-to-fail bank or insurance company or GSE (Fannie Mae etc) debt relief. And Iceland’s results?
The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium.
Everyone from Treasury Secretary Geithner to the IMF’s Christine Lagarde should read the Bloomberg article on the country’s success from which the passages above were excerpted.
Oh, and, Attorney General Eric Holder and the SEC’s Mary Schapiro might just want to read this paragraph:
Tags: Banks, Mortgage crisis
Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.
Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial.
That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown.