Iceland Is … Simmering

The patience of the Icelandic people is wearing thin. After three years of waiting for justice, nothing fundamental has changed. The bankers and businessmen who bamboozled depositors, borrowers, and investors in Iceland and abroad remain firmly ensconced in their mansions and in their jobs, while the rest of the country struggles with ever higher mortgage payments on progressively less valuable houses, rising food costs, and declining government services. Not one of the individuals identified in the ‘Black Report’ issued by the Special Investigative Committee has faced criminal charges, and—to the best of my knowledge—none of them are under any particular financial strain.
Last week, when Alþingi—Iceland’s legislature—narrowly voted to indict Geir Haarde, the former Prime Minister who oversaw the meltdown of Iceland’s outsized financial sector two years ago, it absolved all other government officials of any responsibility for the ruin their decisions and inaction inflicted on our country.
Although the IMF approved the third review of its stand-by arrangement with the Icelandic government, four more reviews are scheduled, and capital controls will remain in place for the time being. Despite persistent rumours, the Icesave fiasco remains unresolved, and Iceland’s long-term credit rating remains marginal.
Inflation is down to 3.7%, but real wages have sunk to the level they were at in 2003. Bankruptcies continue to rise, and the commercial real estate market is stagnant.
When the conservative Independence Party-led government resigned in the face of popular protests in January 2009, many Icelanders expected the new government—led by Prime Minister Jóhanna Sigurðardóttir, the world’s first openly gay leader, and Finance Minister Steingrímur Sigfússon, the leader of the Left-Green Party— to bring a fresh, new approach to government.
Unfortunately, their worldview has been shaped by their long-time association with the financial and political elite that have exploited our nation ruthlessly, and they seem unable to imagine a society based on different rules. Not one fundamentally new idea has been advanced by these “leaders,” and we are stuck in the same paradigm that led to our near destruction three years ago.
Jóhanna in particular appears to have drunk the purple kool-aid. She forcefully opposed the parliamentary committee’s recommendation that four former ministers be taken to High Court because of their part in the economic collapse, and thereby single-handedly saved three of them from an accounting for their incompetence and worse.
No one would ever accuse Steingrímur of bad faith or lack of effort. Unfortunately, though, it appears that his relentless attention to detail has distracted him from the big picture. Or perhaps a man of his integrity simply can’t comprehend the utter lack of integrity exhibited by the leaders of the financial sector he has been charged with regulating. He says that he understands our frustration, yet he has not carried through on his promise to help ordinary Icelanders, and his administration has confirmed to the IMF that there will be no widescale mortgage debt write-offs.
The source of our frustration is that this refusal to forgive debts only applies to individuals. Every week we hear stories of corporations owned by the country’s elite receiving massive write-offs, or of limited liability entities transferring all of their assets to other companies controlled by the same individuals or groups, then declaring bankruptcy. The banks are more than willing to forgive and forget in this situation, but when an individual misses a mortgage payment, they show no mercy.
The facts that the debtor in an Icelandic bankruptcy case does not receive a discharge, and that none of the mortgage loans are non-recourse only compound the situation. A person with a massive residential mortgage will never escape that debt, except by leaving the country. Real estate prices have dropped significantly from their 2007 peak, and the current oversupply of homes would appear to indicate that they will not recover anytime soon. In the meantime, the unemployment rate and the price of necessary goods have both soared, leaving us caught between a rock and a hard place.
The president of one of the banks rescued by the government defended her bank’s actions by claiming that “Solutions are extremely complicated and difficult.” Not so complicated and difficult, though, to prevent the bank from recently writing off the debts of a company owned by another corporation owned by a friend and fellow bank officer, despite the fact that the company still had assets worth hundreds of millions of krónur.
I believe the Icelandic people are willing and able to undergo hardship to help our country recover from the catastrophic collapse, as long as the hardship is spread throughout the population, and those who unjustly profited from their decisions are put in their place. What is unacceptable is to see bank officers continuing to rake in obscene salaries after mismanaging the banks for a decade, the financial elite manipulating the corporate and bankruptcy laws to free themselves of debt while maintaining their extravagant lifestyles, and the clueless politicians wasting their time on trivial matters while the rest of us slowly bleed to death.
What we want is justice. We want equal treatment under the law. We want the architects of the 2007 economy to step forward and explain what the hell they were thinking. We want the politicians to explain to us how they failed us. We want the bank officers to justify their decisions. We want the criminals behind bars. We want the persons who benefited from the national Ponzi scheme to stop hiding behind their corporations and to return all of their ill-gotten gains.
You would have thought that the voters‘ rejection of the established political parties in this summer‘s municipal elections would have alerted Jóhanna and Steingrímur that something was seriously wrong, yet they coasted along, playing party politics like they were still in junior high. The time has come to hold them responsible, as we held the Independence Party responsible in 2009. We need a fresh start and, as Bob Dylan so eloquently put it so many years ago:
Come senators, congressmen
Please heed the call
Don’t stand in the doorway
Don’t block up the hall
For he that gets hurt
Will be he who has stalled,
The battle outside ragin’
Will soon shake your windows
And rattle your walls
For the times they are a-changin’.

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