The US government has so far not sent a single top executive of the big banks that caused the financial crisis to jail. They did not even threaten them with any prosecutions that might have resulted in jail time. A doctrine has grown up that these banks are ‘too big to fail’ and their executives are ‘too big to jail’, that trying to do so might result in worse outcomes than letting them get off scot-free.
Off course this is rubbish. What this immunity does is encourage even greater reckless behavior on their part and set the stage for the next major crisis.
But the government of Iceland is made of sterner stuff and they have sent 26 bankers to a combined 74 years in prison.
Eleven former bankers have been sentenced to four and a half years or more in prison. The former top bosses of Kaupþing have received the longest sentences to date. Hreiðar Már Sigurðsson, the former CEO of failed bank Kaupþing and Magnús Guðmundsson, the CEO of Kaupþing Luxembourg, top the list, having been sentenced to a combined six years in prison for extensive market manipulation, embezzlement and breach of fiduciary duties. The maximum combined sentence for financial crimes according to Icelandic law is six years.
Courts can sentence people to longer prison terms than six years in cases where the crimes are systematic and repeated, and in cases where people make a living from engaging in financial crimes. Future cases against Magnús and Hreiðar Már will determine if the courts consider the two to have engaged in financial criminality of a scale which justifies expanding on the maximum sentences.
Iceland also let its banks fail during the financial crisis rather than bail them out the way the US did. There was nothing in principle wrong with the US bailing out the big banks using taxpayer money. What was wrong was not using the massive leverage that it had at that moment to institute major reforms such as breaking up the too-big-to-fail banks, forcing out the top executives who allowed the crisis to occur, reforming the banks’ operating practices, and bringing back the Glass-Steagall Act to prevent the banks acting like casino with the depositors’ money.