Part of the audience. Photo: Haraldur Gudjonsson.

Gudni Th. Johannesson, Associate Professor of history at the University of Iceland, and Hannes H. Gissurarson, Professor of Politics at the UI, both agreed that new evidence was to be found on the 2008 Icelandic bank collapse, at a meeting held by RNH and the Icelandic Association of Political Scientists Wednesday 14 January 2015. Johannesson has analysed documents from Wikileaks and obtained documents from the British Foreign and Commonwealth Office, FCO, by invoking the British Freedom of Information Act. In his paper, he said that the evidence available to him suggested that a loan from Russia to Iceland, discussed before the bank collapse, had been a real possibility. Also, a much-debated television interview with the Governor of the Central Bank of Iceland, David Oddsson, did not bring about the use of British anti-terrorism law against Iceland, as was sometimes alleged. The documents from the FCO however had limited value because so much was redacted out of them. They nevertheless showed that the British Treasury had, in the autumn of 2008, directed negotiations with the United Kingdom, and not the FCO. Johannesson said that he doubted the “insurrection theory” about Iceland in the financial crisis maintained by Styrmir Gunnarsson and Hannes H. Gissurarson. Johannesson also discussed, in general terms, the historical significance of documents and the demand for impartiality in history. He published a paper in the historical journal Saga on these issues in the autumn of 2014.

Gissurarson giving his talk. Photo: Haraldur Gudjonsson.

Professor Gissurarson pointed out that 7 January 2015, minutes of the Court of the Bank of England from 2007–9 were published online. At a meeting on 15 October 2008, the Court expressed its view that attempts by individual nations to become financial centres should be strongly discouraged. Iceland was taken as a specific example. Gissurarson agreed with Johannesson that a loan from Russia had been a real possibility. He quoted Tryggvi Thor Herbertsson, then the economic adviser to the Prime Minister, who had received a phone call from the Russian Ambassador in the morning of 7 October 2008, immediately after Governor Oddsson had received a call from the Ambassador. The message to both was unequivocal: Russia had decided to issue a loan to Iceland. The Russians had however second thoughts later in the day when somebody informed them that the International Monetary Fund, IMF, was trying to have a programme for Iceland being accepted. After this, Iceland had been entrapped by the IMF which turned itself into a bounty collector for the British, refusing to negotiate until Iceland assumed responsibility for the failed banks’ obligations. If Iceland had, in the midst of the financial crisis, been able to make a currency swap deal or establish a credit line of $5–10 billion, either with Russia or the US, then there would not have been a run on the banks and a massive cancellation of credit lines to them: then, the government could have taken the “Swedish option” which was to keep operating the banks, dividing them up between a “good” part and a “bad” part, with bank shareholders losing most or all of their equity. Then a foreseeable downturn would not have become a total collapse.

Dr. Eirikur Bergmann commented on the two papers. He criticized Professor Gissurarson’s distinction between “good” and “bad” capitalists. He also said that it remained to be explained why the British government had been so brutal towards an old ally and friend. It seemed that it thought that it had been promised a full guarantee of the banks’ obligations in the UK, and that this promise had been broken. Nobody knew however who would, or could, have given such a promise. The meeting which was held at the University of Iceland was very well-attended. A lively discussion followed the papers by Johannesson and Gissurarson and the comment by Bergmann. Dr. Tryggvi Thor Herbertsson confirmed the account given by Gissurarson on the discussion of the Russian loan. The meeting formed a part of the joint project by RNH and AECR, Alliance of European Conservatives and Reformists, on “Europe, Iceland and the Future of Capitalism”. Vidskiptabladid, the Icelandic business weekly, recorded the whole meeting and published it on its website, as well as a series of photographs of it. Both the Icelandic Broadcasting Service and Station Two interviewed Johannesson and Gissurarson for the evening television news, and also the radio programme “The Mirror” (Spegillinn).

Here are the interviews on Station Two:

Here is the account of the meeting in Morgunbladid:

Here are Professor Gissurarson’s slides:

HHG.Reykjavik.14.01.2015

Here is the account in Vidskiptabladid:

Professor Gissurarson giving his lecture. Photo: Andres Magnusson

The Icelandic 2008 bank collapse was self-inflicted in the sense that a precarious situation had been created by the very rapid growth of the three main Icelandic banks. But glass does not break because it is breakable, and a precarious situation does not become a collapse, unless something is done to it. This was what Dr. Hannes H. Gissurarson, Professor of Politics at the University of Iceland and RNH Academic Director, said in a well-attended lecture at the Institute of Economic Affairs, IEA, in London 27 November 2014. According to Professor Gissurarson, three decisions had entered into this precarious situation, transforming it from a recession in Iceland into a total collapse of the banking sector: First, the US Fed had refused to make the same dollar swap deals with the Central Bank of Iceland, CBI, as it had done with the central banks of the Nordic countries and even of Switzerland. Second, in the second week of October 2008 the British Labour government had refused to provide the same liquidity for the two British banks owned by Icelanders as it did for all other British banks. Third, by invoking an anti-terrorism law against Iceland (briefly against the CBI and the Icelandic Financial Supervisory Authority, and for a longer time against the Icelandic bank Landsbanki), the British Labour government had made all rescue attempts impossible. This sudden strike against an old friend, a nation without even a military, a fellow NATO member, recently standing behind the UK and the US in the Iraq War, was almost incomprehensible.

Professor Gissurarson rejected the thesis that the Icelandic banking sector had been too big. In fact, it was about as big relatively as the Swiss banking sector, whereas the Scottish banking sector was somewhat bigger, relative to Scotland itself. Why did the Swiss bank UBS and the Scottish bank RBS then not fail like the Icelandic banks? Because they were rescued, not least by dollar swap deals, provided by the US Fed, and in the case of RBS also by taxpayers’ money from England and Wales.

Alistair Darling

Professor Gissurarson agreed with the Icelandic Special Investigation Commission, SIC, on the bank collapse that there had been a hidden systemic risk in the Icelandic banking sector. This risk was mostly created by the Baugur Group as could be seen from the 2010 SIC report. The Icelandic banks had used the good reputation Iceland had earned in 1991–2004, when sound economic policies were pursued, to obtain foreign credit which they had then passed on to Baugur Group and to some other business groups. Some investments of Baugur Group had been sound, while others had been unwise: For example, the head of Baugur Group, Jon Asgeir Johannesson, had spent tens or even hundreds of millions of dollars on a private yacht, Heesen 4400, a private jet, Dassault Falcon-2000, luxury ski huts in Courchevel in France and an immense penthouse on Gramercy Park in Manhattan. By their extravagance and aggressive behaviour, in 2004–8 Johannesson and some of his business partners had destroyed, or at least blackened, Iceland’s good reputation and thus made it more difficult for the Icelandic authorities  to obtain assistance when subsequently needed. However, the British Labour government had also been outright hostile to Iceland, as could be seen from the book by the former Chancellor of the Exchequer, Alistair Darling, Back from the Brink, published in 2011. It was hard to explain this hostility, but possibly Darling and former Prime Minister Gordon Brown, both coming from Scotland, had wanted to demonstrate to the Scots that independence was a risky endeavour.

After the lecture, Professor Gissurarson answered questions. A member of the audience expressed surprise at the 2013 EFTA Court judgement in the Icesave dispute between the UK and Iceland because surely the Icelandic government had discriminated between Icelandic and foreign depositors. Professor Gissurarson replied that this was indeed a common misunderstanding, shared by British ministers and even judges. By the Emergency Act of 6 October 2008, all deposits in Icelandic banks had been made priority claims, including deposits held by UK residents. However, at the same time, Icelandic government ministers had announced that they would guarantee all domestic deposits. This announcement had not had any legal significance or force, and it was in fact similar to public announcements made all over Europe at that time in order to prevent panic and a run on banks. Professor Gissurarson’s lecture formed a part of the joint project by RNH and AECR, the Alliance of European Conservatives and Reformists, on “Europe, Iceland and the Future of Capitalism”.

Professor Tara Smith from the University of Texas in Austin gave a lecture at the University of Iceland, sponsored by RNH, Monday 24 November 2014, on the moral message in the works of Russian-American novelist and philosopher Ayn Rand. The most influential female philosopher of all times, Rand expressed her political ideas in her novels which have sold in thirty million copies worldwide. AB Publishing has recently brought out three of her novels in Icelandic translations: The Fountainhead (Uppsprettan, 2011), Atlas Shrugged (Undirstadan, 2012) and We the Living (Kira Argunova, 2013). In her lecture, Smith discussed in particular two passages on money in Atlas Shrugged. Francisco d’Anconia gives a speech against the common view that money is the root of all evil. He argues that money is a medium of exchange which enables individuals to satisfy their different needs by free trade, without commands from above. Instead of stealing the goods which people desire, they pay for them with their money. In another passage in Atlas Shrugged it is explained that money also extends life indirectly. It buys time, enables people to satisfy more needs than before. In an order based on money and exchange people have to work ever fewer hours to satisfy their basic needs and thus can use more time for what they really desire, want dream about or aspire to, materially and spiritually. The lecture was well-attended. After it, Professor Smith answered questions from the audience, and then RNH held a reception on the University premises. Professor Smith’s lecture formed a part of the joint project by RNH and AECR on “Europe, Iceland and the Future of Capitalism”.

Here is a lecture which Professor Smith gave on Ayn Rand in Stockholm in 2014: