Daily Archives: January 14, 2010

Iceland is famous for its sagas. But the latest one is truly dramatic: the balance sheets of its privatised financial sector grew from twice to 10 times gross domestic product, in five years. In the absence of a lender of last resort, this story had to end badly. In the panic of 2008, it did.

Because Iceland was a member of the European Economic Area, its banks were allowed to set up branches freely. To raise money, Landsbanki, one of Iceland’s now collapsed banks, set up an internet bank, Icesave, which gulled depositors by offering attractive interest rates. Under the European Union directive, Iceland also had an obligation to establish a deposit insurance scheme, which it did, through a levy on those banks. 

From the FT:
Intolerance of small crises led to this big one – Jacek Rostowski
Britain needs investors for the long term – Peter Mandelson
Financial Crisis Inquiry Commission: Live Coverage – John Gapper’s Business Blog

From elsewhere:
Managing China’s crisis management – Yu Yongding for Project Syndicate
The “other” imbalance and the financial crisis – VoxEU
The Obama financial tax is a start, not the end – Baseline Scenario
‘Sorry’ still seems to be the hardest word on Wall Street – Dana Milbank for the Washington Post