LONDON — The director of Iceland’s prison service received an unlikely request from inmates this year—they thought they should be allowed a glass of merlot with their dinner.
You see, the tiny European country has a better class of prisoner these days. Since the global financial crisis in 2008, a total of 26 bankers have been sentenced to a combined 74 years in prison.
The origin of the wine request is disputed, but after two further judicial rulings this month there’s no doubt the wealthy white-collar prison population is continuing to swell; many of the bankers haven’t started their custodial sentences yet and further high-profile trials of once-powerful financial titans are expected in the coming year.
Iceland—population 330,000—is showing America how to put the bankers behind bars.
Ben Bernanke, the chairman of the Federal Reserve at the time of the 2008 crash, now says U.S. prosecutors should have followed suit instead of focusing on corporate wrongdoing.
“It would have been my preference to have more investigation of individual actions because obviously everything that went wrong or was illegal was done by some individual, not by an abstract firm,” he said.
Eleven Icelandic former bankers have been sentenced to at least 4½ years in prison. The sentences are longest for the most senior figures within the banks.
Magnús Sveinn Helgason, who worked for the Icelandic government’s inquiry into the crash, told The Daily Beast that the evidence seen by him and his colleagues suggested there would be many more successful prosecutions to come.
“This is just the beginning,” he said. “I was kind of surprised when they were sentenced because you get used to people getting away with these things but many of these were just open-and-shut cases. There were textbook examples of insider trading, in some cases it was so egregious that it looked as though someone had made it up as a joke.”
In those fraught months of global panic seven years ago, the events unfolding in Iceland dwarfed the damage done to financial centers in New York and London. The total collapse of the Icelandic financial system was the equivalent of 300 Lehman Brothers going down in the U.S.
Bloated by corporate greed, Iceland’s financial industry had grown so distended that the top three banks were valued at 14 times the GDP of Iceland.
“The bankers were rock stars—they were heroes. In the pre-crash years, they were called corporate Vikings,” said Helgason, an economic historian at the University of Bifröst. “There’s a point when banks become too big to fail but in Iceland they were too big to bail out.”
Without a government bailout, the entire financial industry was bankrupted within a few days. The authorities and Helgason’s Althingi Special Investigation Commission were able to access the banks’ internal data and their emails.
The Althingi commission had similar powers of subpoena to the Pecora Commission, convened after the 1929 Wall Street crash, which led to the Glass–Steagall Act and the establishment of the Securities and Exchange Commission.
With that unprecedented access to confidential information, crimes that can be difficult to prove in a courtroom were suddenly there for all to see.
Some of the bankers already convicted have yet to start their sentences, which were upheld by the supreme court in Reykjavik last month. Many still have apartments in London, and money to pay top lawyers, causing frustration among fellow Icelanders. Slowly, however, they are being brought to justice.
While the wheels of justice turn, the economy has recovered remarkably well without the help of the banks. Helgason now runs walking tours through Reykjavík for tourists fascinated by the rise and fall of the world’s most unlikely financial powerhouse. “The collapse was a tragicomedy,” said Helgason. “But it’s a story that ended well.”