by MintPress News Desk
February 01, 2016
from
MintPressNews Website
Protesters
dressed as wall street bankers,
march from Goldman
Sachs' office
to a rally demanding
Wall Street reform.
Iceland has
prosecuted 29 bankers
for financial crimes
crashed their economy,
the U.S. has
prosecuted none.
(AP Photo/M. Spencer
Green)
Iceland's economy
was among those hit hardest
by the 2008 financial crash,
leading to unusually strict
treatment
of the bankers responsible.
REYKJAVIK, Iceland
While the world economy struggles to
recover from the 2008 financial crisis, most of the bankers who
caused the collapse are still collecting massive salaries and have
faced few, if any, consequences.
Except in Iceland.
In
one of the countries hit hardest by the collapse, 29 bankers have
now been sentenced to prison for their roles in the crash.
According
to,
Stefan Simanowitz,
writing for The Huffington Post on January 5,
"Just before Christmas,
the former CEO of Iceland's Glitnir bank and two other senior
bankers were sentenced to jail terms of up to five years for
market manipulation and breach of fiduciary duties."
Simanowitz questioned why the United States and the United Kingdom,
for example, have been far more lenient on their banks.
"[N]ot
a single senior banking executive in the US or the UK has been
jailed for their role in the financial crisis.
Whilst banks
- such
as the five found to be rigging the Libor rate - have been hit with
substantial fines, the individual bankers behind the fraud,
market rigging and irresponsible lending that led to the
economic meltdown have all avoided time behind bars."
In
October,
Alan Pyke, the deputy economic policy editor for
ThinkProgress, outlined some of the ways
Iceland's approach differed from that
of other countries:
"Like other countries with a large financial industry presence,
Iceland spent a lot of money on bailouts after the crisis.
But it
bailed out workaday citizens instead of bankers,
forgiving mortgage debts
that exceeded 110 percent of the actual value of the home linked
to the loan.
The banks, which had swarmed to the north
Atlantic island after aggressive deregulation of Icelandic
finance law around the turn of the century, were allowed to fail
and go bankrupt."
Pyke
cautioned that,
"[c]omparing Iceland and the U.S. isn't entirely
fair," given the difference in population and the relative size of
our economies.
"It's far easier for a country of 320,000 people to
nationalize its banks, devalue its currency, and bounce back rapidly
after a couple years of deep economic pain," he wrote.
Meanwhile, there's reason to be concerned that other countries
haven't done enough to prevent another crash.
The most recent bank
to pay a major fine in the U.S. was
Goldman Sachs,
which agreed to a fine of $5.1 billion. The massive international
investment bank claimed to be "pleased" with the deal, which will,
"reduce earnings for the fourth quarter of 2015
by approximately $1.5 billion on an after-tax basis."
But for the corporation that
brought in over $40 billion in 2014, the fine isn't likely to cut
too deep into profits.
Reporting on the agreement on January 15, Shadowproof's
Dan Wright
noted that
banks continue to earn money
while the rest of the population suffers.
"In the aftermath of the crisis Wall Street caused, the
middle class has been hollowed out,
with the U.S. hitting a
record amount of childhood poverty.
The perpetrators, meanwhile, have been fully restored and are
beating profit expectations.
What a country..."
Other
banks forced to pay fines - without executives going to court - include,
-
Citigroup Inc.
-
JPMorgan Chase & Co.
-
Bank of America
Corp.
Wright also reported on January 11 that many of the key factors that
caused the 2008 financial crash are still in place, creating
the potential for a new bubble
economy,
as depicted in the recent, popular film and book, "The Big Short."
"[P]rior to the 2008 crash the credit rating agencies were giving
junk mortgage-backed securities (MBS) their highest ratings.
This
incorrect information helped distort the market and exacerbated the
crisis. The rating agencies gave the bad ratings their approval, in
part, because of a conflict of interest where rating agencies are
paid by those they rated. If a client did not get the rating they
wanted, they would take their business elsewhere.
Now the SEC is saying the rating agencies are
back to their old tricks,
compromising their claimed objectivity to bring in business."
False
confidence in these high-rated securities that were actually full of
junk mortgages was a major factor which contributed in the original
crash.
He concluded,
"Apparently, we are going to run this experiment again and hope
for different results."
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