Former PM: Kaupthing Emergency Loan "A Mistake" - The Reykjavik Grapevine

Former PM: Kaupthing Emergency Loan “A Mistake”

Published May 13, 2015

Photo by
Johannes Jansson/Wikimedia Commons

Former PM Geir H. Haarde told viewers in a televised interview that lending the failing Kaupthing bank 500 million euros in October 2008 was “a mistake”.

Kjarninn reports that Geir gave Stöð 2 news an interview last night, wherein he discussed some of the highlights of his term in office. Geir, who was forced to step down as Prime Minister just months after the bank crash of October 2008, offered his opinion in retrospect of some of the events of the crisis.

Amongst them was that it had been “a mistake” on the government’s part to issue a 500 million euro emergency loan to Kaupthing bank on October 6, 2008. The money was not nearly enough to rescue the bank, he said, and it did not go where it should have.

Geir was also asked about a mysterious phone conversation he had with former Central Bank chairman (and current Morgunblaðið co-editor) Davíð Oddsson, which allegedly concerned the issuing of the loan. Geir said he did not want a recording of the phone call released “on general principle”.

In 2010, parliament narrowly voted in favour of Geir standing trial for negligence and mismanagement while in office. The vote came in the wake of the 2010 Special Investigative Commission Report on the contributing causes of Iceland’s autumn 2008 financial meltdown. Geir, along with three other ministers, were cited as culpable.

On March 6, 2012, Geir’s trial began. The trial, which lasted until April 23 of that year, featured numerous witnesses coming to testify, including former Central Bank chairperson and current Morgunblaðið editor Davíð Oddsson. Geir maintained – as he has since charges were first levied against him – that his government could not have foreseen the 2008 economic collapse, nor did it have any idea that the banks’ assets were so over-leveraged. “Nobody predicted that there would be a financial collapse in Iceland” in 2008, he said.

Geir would ultimately be found guilty of one of the four charges of negligence levied against him. Specifically, the charge was that he either knew or should have known that he had to respond in some way to the information he had been receiving that the economy was unstable. Prosecutor Sigríður Friðjónsdóttir concluded her final arguments by saying that when it comes to the personal responsibility of a government minister, the law is clear. Geir had many opportunities to step in and prevent disaster, she said, all of which he chose to ignore. Andri Árnason, Geir’s defence attorney, argued on the other hand that many matters were kept deliberately hidden from Geir until it was too late, if they were revealed at all.

However, the court did not give Geir a sentence for the charge, and ruled that the Icelandic government would pay for his legal expenses, which totalled 24 million ISK.

Since then, Geir moved on to get a job as an “international affairs consultant” for the law offices of Opus. He was then made Iceland’s ambassador in Washington, D.C last July.

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