Sigrún Davíðsdóttir's Icelog

The report: a few highlights from the press conference re public governance

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Pall Hreinsson outlined the shortcomings within the government, the Central Bank and the regulators. It’s a tale of staggering lack of coordinated action and share bewilderment. There was a so called ‘coordination group’ but this group didn’t take their task very seriously.

At one point in spring 2008 the government thought that the Central Bank should ‘do something’ – but the Central Bank thought it was up to the government to lead that ‘something’. Not surprisingly, nothing was done. And that’s more or less how things continued.

When the banks failed there was no plan in place how to proceed. However, no matter what, in 2008 the banks were beyond salvation. The necessary measures should have been taken much earlier.

Bank of England was contacted in early spring of 2008. The Icelandic Central Bank wanted to make currency swaps but got a plain ‘no’. However, in a letter Mervyn King offered assistance in terms of advice. His letter wasn’t answered. Instead, Icelandic politicians, like the bankers, continued to claim that Iceland’s problem was a lack of understanding in international markets. The problem was a problem of image.

Leading ministers – the prime minister, minister of finance and minister of trade and bankin – failed in their office. The director of the Icelandic Financial Services, FME, and the three directors of the Central Bank also failed to carry out his duties. It will now be up the Althingi, in case of the ministers, and courts if those mentioned will be brought to court for their failures.

Vilhjalmur Arnason, from the Commission’s Ethical committee, is now pointing out the destructive influence of political appointments of civil servants. That fact that David Oddsson governor of the Central Bank had been a politician had a particularly bad influence of the bank’s trust.

Criticism from abroad was always branded as ‘evil’, a sign of ‘jealousy’ instead of taking it seriously. Banks and wealthy individuals made donations to the political party – no doubt an unhealthy effect on critical thought towards these same individuals and banks within the political parties.

Last but not least: by travelling the world and extolling the Icelandic financial geniuses the president of Iceland didn’t portray the nation in a sensible way as the so called Icelandic success made the standing of the banks in Iceland far too great.

Salvor Nordal, also from the Ethical committee, pointed out the ingrained lack of respect for law and order in Iceland.

Sigridur Benediktsdottir gave a fascinating insight into the banks – will deal with that later…

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Written by Sigrún Davídsdóttir

April 12th, 2010 at 11:50 am

Posted in Iceland

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