The financial crisis in 2008 served as a stark example for everybody about the volatility of the global economy. This month, we’ve had numerous other reminders as the US stock market experiences its worst ever start to any year ever.
Quickly after the financial crisis, derivatives positions increased to new highs. Many of the behaviors that caused the financial crisis remain in place. In Iceland, representatives chose a different path.
Iceland has 26 bankers over his role in the 2008 economic crash, which led to what some mainstream experts are now labeling a “recession-depression.” The banker, charged with breach of fiduciary duties to market manipulation and embezzlement, will be punished for abetting the collapse of Iceland’s three major banks, which led to $114 billion worth of defaults in the $19 billion economy (GDP).
Parliament there voted in favor of emergency legislation to nationalize major banks and created new banks to manage them. Parliament later charged numerous banking officials with fraud and market manipulation. Sentences range from four-to five-and-a-half years.
“Why should we have a part of our society that is not being policed or without responsibility?” said the special prosecutor.
The bankers combine for 74 years in prison. Complains run deep in regards to the stark differences between the way the US government managed the financial crisis and how Iceland did.
Nearly all the financiers who headed powerful American firms in the run-up to the 2008 economic crisis remain wealthy, powerful, and free. Not so in Iceland, where jail sentences handed out last week bring the number of bankers imprisoned over the meltdown to 26.
Combined, the bankers will spend 74 years behind bars. While critics of such stringent treatment of the business community often warn that cracking down on finance hurts the economy, Iceland’s experience has shown it’s possible to pursue corporate accountability and broad growth at the same time.
The American form of justice for banking titans has been rather less robust. Prosecutions for all white-collar crime are at a 20-year low. Criminal prosecutions of corporations dropped 29 percent from 2004 to 2014.
Here are some of the bankers jailed thus far. For instance:
Bjarni Ármannsson, President of Glitnir
Bjarni was sentenced to 6 months in prison by the District Court of Reykjavik for major tax noncompliance. His sentence was suspended and he was additionally ordered to repay nearly 36 million ISK of unpaid tax. The Supreme Court of Iceland increased his suspended sentence to 8 months.
In the US, Wesley Snipes, Lauryn Hill and Nas receive the punishment instead.
Whether or not banking officials will be prosecuted if the markets collapse and cause harm to the economy again cannot be unknown. Some argue that persecuting bankers could harm the economy by taking experts out of key positions, while others say the "experts" are the ones doing the harming. For sure, the US has a model for punishing bankers in a court of law in Iceland if it should choose to go that route.
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