Iceland Exits Capital Controls Eight Years After Banking Crash
by Omar Valdimarsson
March 12, 2017, 7:49 AM PDT
The government at a hastily called press conference on Sunday in Reykjavik announced that effective Tuesday it will lift almost all of the remaining capital controls, allowing its citizens, corporations and pension funds full access to the global capital markets.
The move ends an eight-year struggle to clean up after the 2008 banking collapse, which triggered the worst recession in more than six decades and enveloped the north Atlantic island of 340,000 people in political turmoil.
Visiting Iceland today, it’s hard to imagine how a tiny fishing nation without a tradition of big banking became synonymous with the idea of “Viking capitalism”. About a decade ago corporate raiders embarked on a high street spending spree funded by the country’s largest banks, which built up assets 10 times the size of the country’s economy. …
Then, in the autumn of 2008, as the world dealt with its biggest financial crisis in 80 years, Iceland went pop more spectacularly than anywhere else, staving off bankruptcy only by letting its big three banks — Glitnir, Kaupthing and Landsbanki — fail.
… the role of special prosecutor was created to look into rumours of epic financial wrongdoing. Nobody applied. When, the following year, a small-town policeman more used to handing out parking fines took the job, conspiracy theorists smelled a rat: clearly, they thought, the problem was being buried.
They were wrong. Olafur Hauksson may not draw recognition from other diners as he strolls into the Hilton hotel just outside the centre of Reykjavik at noon, but he is responsible for one of the most impressive feats accomplished in the post-crisis world. For Hauksson, 52, now Iceland’s district prosecutor in charge of investigating all major crimes on the island, is the only person in the west to have jailed a big bank’s chief executive.
So how did he go about pursuing the people at the very top? He says it was mostly about following the document trail very carefully — particularly in times of stress and crisis, emails can be especially revealing.
This ties into my theory that one reason the American financial industry has been concentrating in recent decades in the NYC area rather than spreading out across the country as improved communications technology would seem to warrant is so that really important communications can be made in person without leaving an electronic paper trail. The Icelandic bankers were fools to think they could sit out in the mid-Atlantic and enjoy a level playing field.
Yes, very much OT, but it has occurred to me that this is the reason why Obama remains in Washington to direct present and former Federal employees in the “resistance ” movement against the duly elected Prez.
It was also, he tells me, about keeping going to the logical conclusion rather than stopping. “It’s finding out who is responsible. That’s a totally different thing. In some ways, it was clear where this all came from. It was important to make the employees aware that if they cannot point to someone else, they will be the one to blame,” he says.
It is a simple point but it makes me stop. I spent several months at the end of 2015 reporting on Volkswagen’s emissions scandal. So far at the German carmaker — just like at the big US and European banks — there has been plenty of talk of big fines but only relatively junior employees have been fingered for potential criminal responsibility.
A hookers-and-blow prosecutorial strategy was suggested in the documentary Inside Job: go arrest some high-priced call girls. Get them to roll over on clients who are traders at big firms. Arrest the traders, get them to roll over on their managers. Arrest them. Get one to roll over on the COO. He rolls over on the CEO.