Since the onset of the Global Financial Crisis in 2008, there has been much debate about reforming the financial sector and improving the accountability of its major actors. In fact, many of the principals involved in creating the mess which led to the greatest financial disaster since the Great Depression, are still in major positions of influence and power. They comprise an “old boys’ network”, whilst largely ignoring some of the most capable people, notably women, who correctly diagnosed the problems facing us and who could have made a marked difference had their counsel been heeded. It is worth considering how the global economy look today if the prescient counsel of figures such as Elizabeth Warren, Brooksley Born and Sheila Bair been heeded?
Gudrun Johnsen, currently an assistant professor at the University of Iceland, and a co-organiser of Institute’s Finance & Society conference to be held in Washington DC on May 5th-6th this year, has a unique perspective to share: As a Senior Researcher with Iceland’s Special Investigation Commission, she had a front row seat of the rise and fall of the Icelandic banking system. In many respects, Iceland represents “Ground Zero” of the global financial crisis, insofar as it provides of microcosm of many of the failed pathologies of the banking system that has dominated the global economy for the past 30 years. In Iceland, the combined collapse of the country’s three largest banks in 2008 represented the largest banking system collapse suffered by any country in modern economic history, relative to GDP. How could tiny Iceland build a banking system in less than a decade that proportionally exceeded Switzerland’s? Why did the bankers decide to grow the system so fast? How did businesses tunnel money out of the banking system? Why didn’t anybody stop them? Most saliently, what are the broader lessons that can be applied to the global financial system as a whole today to ensure that we don’t have more Icelands?