Don’t lend any more money!

In the fall of 2007 the loan division of one of Iceland’s largest banks got a clear message from their boss. An experienced banker known for intergrity and a no-nonsense style. 

Don’t lend any more money! 

The reason he said was that the year 2008 would be disastrous for Iceland financially. Many businesses, including some of Iceland’s largest would go bankrupt and so would individuals. He said he was afraid there would be a horrible year ahead.

“So stop lending money!” 

The employees choked on their pastries and wondered what on earth was going on. Two weeks later he came back into the same meeting and this time the message was even starker. 

“Didn’t you guys understand me? Don’t lend any more money!”

In April 2008 another Icelandic bank was handed a gloomy report by British economists Willem Buiter and Anne Sibert. It predicted the collapse of the Icelandic banks for reasons that later came true. 

On September 23, 2008 the same banks’ analytical department held a lecture on Icelandic economy matters titled “Enviable long term prospects”. It said that “general prosperity, debt-free government, strong fundamentals and plentiful unused natural resources are amongst the factors that contribute to enviable long term prospects for Iceland.” 

Less than a month later this sentence could not have been more false if it tried.

Is it too much to ask that the advise given by the Icelandic banks in the year running up to the October 2008 crash should be researched? 

How much did they know? How did they respond?


1 Response to “Don’t lend any more money!”

  1. 1 Roy February 24, 2009 at 6:12 pm

    Please tell me that the following isn´t true…

    “Greetings friends, I just heard that the banks have not stopped buying salmon fishing licenses, just changed the process a little, now the licenses are bought by the “guide” and send the bank a bill labeled as “consulting”. I feel that this is a matter of our concern since the banks are now public property.”

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