Sometimes, There Are No Good Decisions

Where Icesave used to be the topic that everyone loves to hate to talk about, it's now the economy. I can honestly say I am glad - no, delighted that I am not in parliament anymore, because whenever the subject of the economy comes up, you'll hear plenty of opinions about what this government is doing, and none of these opinions are good.

Forget the fact that Moody's raised Iceland's rank from Negative to Stable, or that unemployment is decreasing, or that inflation is dropping. It's been a little over a year since the Social Dems and Leftist-Greens took over, and these changes for the better are not enough to satiate most people. In fairness, most people aren't really feeling these changes in their daily lives, and there's still some complicated stuff going on with how to deal with personal loans. But worst of all, the government needs to make more cuts still.

Cue the latest decision from upstairs: Minister of Social Affairs Árni Páll Árnason announced yesterday a salary cap on public employees until the year 2013. His reasoning is it's either salary caps, or people getting fired.

I'm a public employee. My day job is working at an occupational center for disabled people. We're under the Ministry of Social Affairs. Come 2011, we're going to be under the command of the municipal government, and who knows how that's going to go. We've been told it won't be any worse than working for the state. Wow, awesome. That's reassuring.

Anyway, people at work today were pretty upset about the salary cap, and they wouldn't be alone - the Union of Public Servants is frankly furious about this right now.

And that's just the thing. Whenever the government needs to save money, there are two choices: make cuts or raise taxes. Everyone knows this. Yet neither decision is going to make anyone happy. Wherever you cut, or whoever has to pay more taxes, the government is going to get flack for it.

The worst part of all is that the Independence Party - the same guys who trashed our economy - are actually growing in popularity, while support for the ruling coalition is decreasing. The conservatives are still not as popular as the ruling coalition, but come on. It's been a year, people. We're not living the high life by any stretch and we still gotta long way to go, but why would you hand this country back to the people who bankrupted us?

It's like an abusive relationship or something. "He said he was sorry. Maybe this time, he means it." Snap out of it already!

Let's Get This Party Started

So, the local news has been more or less updating various minutae about Jón Ásgeir. It really hasn't been dude's week. First, he gets his assets frozen by the people now taking care of Glitnir, as they investigate him for tax fraud. Then, he gets hit with a lawsuit. He's been fairly unflappable so far, though. And with good reason - very little sticks to this guy, and what does hardly leaves a scratch.

If you want some idea of just how powerful this guy was when he was at the top of his game, start here, then go here, and read the relevant articles. Don't be surprised if you get a nosebleed trying to visualize just how far and wide the octopus of this man's grip extends across this country and beyond.

The roughest thing this guy has had to go through up until recently was a June 2008 conviction for breaking accounting laws that compelled him to step down from the chairmanship of the investment company FL Group. In his place, his wife Ingibjörg Stefanía Pálmadóttir was elected. The company changed its name to Stodir, and then bought a 39% stake in Baugur Group - which is owned by Jón Ásgeir.

Well, a lot has happened since 2008, of course. With the grip tightening on the Kaupthing guys, and the general spirit of vengence in the air, he's probably starting to feel a little nervous. Or maybe he isn't. Just look at those jazz hands. Does this look like a man who's easily rattled?

(Photo credit: Chris Casaburi)

Holy Wow

As most of you know by now, former Kaupthing chairman of the board Sigurður Einarsson is now wanted by Interpol. Yes, that's a big story. I honestly can't remember an Icelander who's ever been wanted by Interpol. Then again, I'm American by birth, and our concept of Interpol is this shadowy secret police that hunts down international jewel thieves with underground lairs. Maybe this sort of thing is more common than I know.

However, what I found particularly stunning is that the newspaper Fréttablaðið not only got an interview with him, but just how clueless and arrogant his responses were.

For example: his take on the special prosecutor seeking out the bankers and investors who played Vegas with other people's money and ruined the nation is "I am absolutely flabbergast at recent events. It really surprises me that men are being arrested upon their arrival in Iceland."

Of course it surprises him. White collar criminals don't get arrested; they get escorted. They don't get put in prison; they're slapped with a flight ban. They can still roll up to court in their Land Rovers, and strut into the building in their finest clothes, sipping their bottled water. Real criminals - you know, people who steal cash the old fashioned way - they're the ones who get cuffs and jailcells, who get led into court with their jackets over their heads. In other words, crooks steal thousands; businessmen steal billions.

But my favorite quote from this guy would have to be this:

"I find these arrests and jailings absolutely unnecessary, and will not at least take any part in this drama, which I believe is being put on to soothe the anger of the nation."

You see? He's the victim here, people. The decent, hard-working former bank managers of Kaupthing are being scapegoated to placate us angry peasants. It's all just one big circus to distract us from the real culprits behind the economic collapse: plain ol' bad luck! Or the Rosicrucians. I don't think anyone's mentioned them yet, which I think is very suspicious.

William Black for Central Bank Chairman!

One of the things that can be frustrating about interviewing Icelandic politicians or other officials is that they can, and often do, guard their words very closely. Can't say I necessarily blame them. It's a small country, and you never know who you might anger, or what door you might permanently shut, by saying the wrong thing. You ask a question, and you can see them trying to carefully construct their response. Of course that's a boon in many ways. You want someone to be sure that they mean what they say, and to speak with certainty. On the other hand, this also leads to requests to pre-read an interview, where they then attempt to redact this or that. And of course, there's my own selfish motivation of wanting, just once, for someone to be outspoken, speak plainly, and say what's exactly on their minds. It happens, don't get me wrong, but only once in a blue moon.

That's why it was a pleasure to interview William Black. In case you don't know the guy's background, he's essentially been an economic pit bull in the US for many years now. When everyone else was tossing around the "too big to fail" meme, and Bernie Madoff's Ponzi scheme hedge fund overshadowed the everyday wrongdoings elsewhere in the country, Black was one of few people willing to call a spade a spade and say that the banks involved in the economic collapse were themselves a Ponzi scheme.

This guy had absolutely no qualms with telling me that accountability for Iceland's economic collapse begins with the political parties that created the environment for it. As you can see in the interview, he's sharp, insightful and candid. He has no problems speaking his mind, and has both the education and the experience to back it up.

I believe - and I don't think I'm being hyperbolic here - that William Black should be awarded Icelandic citizenship and immediately hired as chairman of the Central Bank. Yes, he's already pretty busy with that teaching gig, and no, he doesn't speak nor understand Icelandic. But these are trifling details that could be worked around.

I'm not asking for the moon here. And who would possibly object? Surely parliament can make it happen.

FIRST

Most of what I do for the Grapevine is translate domestic news into English. And because it was the economic collapse in fall 2008 that got me posting news again, it's made a red thread of itself through most of the news I post. So naturally, when I heard that Former Kaupthing manager Hreiðar Már Sigurðsson, along with former Kaupthing bank manager in Luxembourg and current director of Banque Havilland, Magnús Guðmundsson, had been arrested for financial wrongdoing in light of a report from the Special Investigative Commission (SIC), this caused a certain sense of relief. When I'd read Vísir disclosing where the men were being held after their arrest, the police station by Hlemmur, I imagined for a moment a mob descending on the place.

However, at work the following day most everyone was decidedly cautious about celebrating just yet. This is entirely new territory for Iceland, after all. White collar crime is notoriously underprosecuted. All the same, when Reykjavík District Court denied the men immediate release, and instead sent them to custody at the prison Litla-Hraun - where they'll be in solitary - for twelve and seven days respectively, This gave me a bit of hope. The judicial system, it seems, is willing to act.

But even if there aren't any convictions - and I'd be surprised if there weren't - to go from collapse, change of government, investigation and then arrests within about 18 months is quite a feat.

My biggest worry right now is that special prosecutor Ólafur Hauksson will stay focused on the banks alone. As professor of Economics and Law William Black told me during his visit to Iceland, "the Icelandic government at the time [leading up to the bank collapse] was an almost literal cheerleader for the industry. ... That included the prime minister [Geir H. Haarde], that included the Central Bank chairman [Davíð Oddsson], and that included the regulatory agency."

It's not illegal to be a libertarian, of course. Oddsson and Haarde are welcome to believe in the invisible hand. But what Black points out is that the government did not exert the kind of vigorous supervision that is necessary for a healthy economy: "You have to be more objective. For financial institutions to work well, you need trust, and the paradox is, you need somebody who is skeptical. And there was nobody. Nobody in the senior ranks that was skeptical. ... the ruling political parties at that time, if you had to start with accountability, that's where you would start."

Negligence or collusion, there's enough to bring charges on both Haarde and Oddsson. Whether they'd stick is another matter. In the SIC report, Oddsson depicts himself as being constantly lied to by bank managers. He related a story of yelling in the face of an Financial Supervisory official when presented with Glitnir's numbers shortly before the government took it over. He paints himself to be a decent man surrounded by liars. Even the front page of the newspaper he edits, Morgunblaðið, saw fit to run "The Banks Are Responsible" as their banner headline the day after the report was released, while Oddsson himself was recusing himself from his chair for the week. Making charges stick on Oddsson will necessitate proving that he either purposefully turned a blind eye or was in cahoots.

Haarde, for his part, comes out as more clueless than anything else and, unsurprisingly, terrified of Davíð Oddsson. He wouldn't be alone. Oddsson has a strong grip on the old guard of the conservatives especially. But fear carries with it resentment, of course, and some of his own party members have turned a cold shoulder to him.

Even the President has been brought into this. The SIC report basically said the guy was the PR man for the "outvasion vikings", and used his office to gain favors for some of them. The President's denied any wrongdoing, and said the report has numerous inaccuracies regarding him. It's moot either way, because no one is arresting the President of Iceland. It's just not gonna happen.

Right now, there are two men in solitary confinement in prison, essentially charged with helping to ruin Iceland. We're off to a good start. But none of it will mean anything until the apparatus of government itself is changed.

The banks were allowed to grow ten times the size of the GDP not just because the government was whistling as it drove along, the bolts flying off the wheels. There's never been a real financial supervisory force in place. Privatizing the banks - which was finalized in 2003 - was done on the belief that it was more freedom the banks needed, that this would stimulate growth. The pendulum had swung from one side, to straight through the opposite wall.

Until an active, powerful and politically neutral institution that can and does monitor and calibrate the economy is established, nothing in this country is going to change.