After almost four years of rapid economic expansion, the entire Icelandic banking system melted down last October, resulting in the biggest banking collapse that any country has suffered, relative to its size. The country’s financial success from 2003 to 2007 — during which the Icelandic stock market multiplied by nine times — turned out to be a debacle when the nation’s three biggest banks collapsed, leaving 300,000 citizens to bear the responsibility for $100 billion of losses. Icelanders ultimately amassed debts amounting to 850 percent of their G.D.P.

Following the collapse, the Icelandic government tapped Yale economics lecturer Sigridur Benediktsdottir GRD ’05 to be a part of its special Investigation Commission. Benediktsdottir, who currently teaches “Intro Macroeconomic Analysis” and “Financial Markets,” will work with the commission this summer to analyze the causes and consequences of the banking crisis. She sat down with the News on Friday to discuss her upcoming work with the commission and her insight into Iceland’s economic meltdown.

From the Yale Daily News

Sigridur’s seat on the commission is now in jeopardy because of this interview. According to DV, Jonas Fr. Jonsson, former head of the Financial Authority complained about her comments in the above interview to the chairman of the commission. The chairman is a well known buerocrat who might use this as an excuse to relieve her of her duties.

Egill Helgason has said her following comments about the regulators are akin to saying the sun rises in the east and that it rains quite a lot in the south of Iceland.

“I am disheartened by this failure; I feel it is a result of extreme greed on the part of many and reckless complacency by the institutions that were in charge of regulating the industry and in charge of ensuring financial stability in the country. Iceland will end up with a huge foreign debt as a result, which may not be the worst of it, since our reputation is completely tattered. This will take future generations some time to work through.”

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4. Special Prosecutor of Iceland Bank Crash: “The Idea Most People Have of Banking Has No Basis In Reality”
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