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In some countries, at least, irresponsible bankers face accountability

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Fascinating article at FT.com (Financial Times), free registration required. The article is by Michael Stothard in Reykjavik and begins:

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visitor seeking a sense of how Iceland’s clique of powerful financiers saw themselves before their empire came tumbling down need look no further than Reykjavik’s Harpa concert hall. The extravagant steel and glass structure, which has more seats than London’s Royal Opera House, looks like a futuristic beehive glowing above the grey buildings that make up most of the capital.

It was commissioned by Bjorgolfur Gudmundsson, one of the “Icelandic oligarchs” who exploited cheap credit following the aggressive financial deregulation of the early 2000s to create a billion-dollar empire. He set out in 2007 to build a cultural venue to match the country’s new found wealth – but when the global financial crisis hit the next year, and Iceland’s overleveraged banks collapsed, he went bankrupt, leaving the state to complete the project.

The Harpa finally opened last May amid grumbling about the cost to overburdened taxpayers. But nearly a year on, like Iceland itself, it is proving surprisingly successful. A source of growing national pride, it has played host to musicians including Vladimir Ashkenazy, Bjork and Yoko Ono, as well as half a million visitors.

Now, in a month where the country has put on trial Geir Haarde, the former prime minister, begun legal proceedings against its once almighty bankers, and received a steady stream of good economic news, many in government and beyond argue that the Harpa should serve not as a symbol of hubris but as a monument to a nation putting the past behind it.

Iceland’s recovery from the shock of the crisis matters more than its small size and 320,000 strong population would suggest. Formerly one of the richest nations in the world in terms of income per head, it won the dubious honour of being the first and among the most calamitous victims of the crisis, a prime example of the risks of financial deregulation. Today Iceland is not only the first country to put its political leader on trial for the crisis but it also offers a test of the advantages of indebted nations simply letting their banks collapse and default on their loans.

Steingrimur Sigfusson, minister for economic affairs and one of those who sings the praises of the Harpa, points to the significance of the trial of Mr Haarde, who ran the country from 2006 to 2009. It “is one of the big things that needs to be dealt with . . . before the country can return to normal”, he says.

It is the first of a series of legal procedures designed to salve national anger at the cost of the crisis, which led to a 10 per cent decline in gross domestic product and a sevenfold increase in unemployment. Mr Haarde is, in effect, charged with failing to do everything in his power to prevent the demise in 2008 of the three biggest banks by assets – Kaupthing, Landsbanki and Glitnir. Their downfall and default on $85bn of debt led directly to the collapse of the currency, the government and much of the economy.

The proceedings have so far disappointed those expecting substantial revelations of wrongdoing, but people on the streets of Reykjavik say there was satisfaction at seeing a politician face his accusers in court. The former prime minister faces two years in jail if found guilty next month. He denies the charges.

Some say it is the trial of the bankers, which began a few weeks ago, that will help Iceland shake off the demons of its financial crisis. . .

Continue reading.

Written by LeisureGuy

31 March 2012 at 11:25 am

Posted in Business, Government, Law

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