Professor Hannes H. Gissurarson, director of academic studies at RNH, reads a paper on explanations on the 2008 Icelandic bank collapse at the annual conference of APEE, Association of Private Enterprise Education, in Las Vegas in Nevada Monday 14 April 2014. His lecture is scheduled at 2.55–4.10 pm in a seminar chaired by Anna Sachko Gandolfi. Other participants in the seminar are James Lee Caton, Jr. from George Mason University, and Atin Basuchoudhary, Samuel Allen and Troy Siemers from Virginia Military Institute. Professor Gissurarson rejects two common explanations of the bank collapse. One of them is that it was caused by the failed “neo-liberal” experiment of David Oddsson, Prime Minister 1991–2004. Two facts are sufficient to refute that explanation according to Professor Gissurarson. The foreign expansion of the banks began in 2004, the same year as Oddsson stepped down as Prime Minister. The second and more important fact is that the Icelandic financial market operated under precisely the same legal and regulatory framework as its counterparts in other member states of the EEA, European Economic Area, comprised of all the EU countries in addition to Iceland, Norway and Liechtenstein.
The other explanation rejected by Professor Gissurarson is that Icelandic bankers had been more reckless or naive than their colleagues abroad. Gissurarson’s arguments against this are two. First, Icelandic bankers received loans from foreign bankers, and then it has to be explained why those foreign bankers were reckless or inexperienced enough to lend money to the Icelanders. The explicandum is only moved one square further by this. In the second place, many banks were close to collapsing in the international financial crisis, for example UBS in Switzerland, RBS in the United Kingdom and Danske Bank in Denmark, the difference from the Icelandic banks being that they were rescued, not least because their central banks could make dollar swap deals with the US Federal Reserve System.
According to Professor Gissurarson, the origins of the Icelandic bank collapse can instead be traced at least partly to decisions made abroad. The US Reserve System refused to make dollar swap deals with the Central Bank of Iceland at the same time as it made such deals with all other European central banks outside the eurozone; the British Labour government did not only refuse to rescue the Icelandic-owned British banks, at the same time as it bailed out all other British banks, irrespective of their ownership; it also invoked an anti-terrorism law against Icelandic bank Landsbanki, the Central Bank of Iceland and the Icelandic Financial Supervisory Authority, thus destroying all hopes of saving anything from the ruins of the Icelandic banking sector. Professor Gissurarson has lectured before at the annual meetings of APEE and published papers in its Journal of Private Enterprise. His lecture in Las Vegas forms a part of the joint project by RNH and AECR, the European Alliance of Conservatives and Reformists, on “Europe, Iceland and the Future of Capitalism”.