Iceland is not a place that embraces jail. It puts just 45 out of every 100,000 people in jail, ranking it at 202 out of 222 countries or territories when it comes to incarceration rates, according to the Institute for Criminal Policy Research.
But it looks like Iceland is about to surge way up that list: as of this month, the Arctic nation has sent 26 bankers to jail for financial crimes like market manipulation, embezzlement and breach of fiduciary duties, according to Iceland Magazine. As a small country of about 320,000 people, Iceland had just 165 people in jail in 2010. So the banker convictions will probably send its incarceration rate up significantly.
Of course, the reason anyone outside the Arctic circle is paying attention to Iceland’s jailings of bankers is because of comparisons to the United States. The U.S. is notoriously incarceration-prone, ranking No. 2 on that same list of global incarceration rates. It’s not controversial to say that too many people spend too much time in jail here, including children, sometimes for petty offenses or without any merit. America’s tendency to throw people in jail first and ask questions later has become a big political issue in the 2016 presidential election.
So, it boggles the mind to think that no one has been sent to prison for the financial crisis in the U.S., which had much more significant consequences than Iceland’s did. It left millions of people jobless and out of their homes, and had ripple effects around the globe. The answer to the question “Why?” is unsatisfying.
Financial journalists have spilled a ton of ink pondering this very question, which has dogged the country for almost seven years. After exhaustive reporting, Pulitzer Prize winning financial journalist Jesse Eisenger came to the conclusion that the Justice Department made lots of excuses, and ultimately its efforts were too little, too late. William Cohan also did some excellent reporting on the government’s $13 billion settlement with the largest bank in the country, JPMorgan Chase, which involved a lot of dollars but no jail time. More broadly, he has come to the same conclusions as Eisenger about the DOJ’s efforts to prosecute wrongdoing by individuals.
Even Jed Rakoff, a federal judge deciding some of the landmark financial crisis cases, has criticized the federal government’s feckless attempts to hold people accountable for the crisis.
Meanwhile, in Iceland, 26 bankers have been sentenced to a combined 76 years in prison for wrongdoing for similar issues. And it’s not all low-level traders or underwriters taking the fall: among those sentenced are Hreidar Mar Sigurdsson, the former CEO of failed bank Kaupthing and Sigurdur Einarsson, the former chairman of its board, as well as Sigurjon Arnason, former CEO of Landsbanki. Crimes of the offenders were mostly related to schemes they concocted to hide the banks’ financial troubles. I’m not an expert on Iceland’s legal system, and it could be that prosecutors there found much better evidence than U.S. prosecutors did. But it also seems likely that either Iceland’s laws allowed prosecutors more leeway to go after offenders, or they were decidedly more aggressive than their counterparts in the United States. After all, U.S. executives were not always forthcoming about what was really happening on their banks’ balance sheets during the financial crisis, either.
In any case, Iceland’s financial crisis was similar in its origins to that of the U.S., but it was more exaggerated and, because it’s a smaller country, Icelanders experienced a much more severe downturn than the U.S. did. Its banking system failed, its currency became worthless and its economy tanked. However, in the aftermath of the crisis, fed-up citizens kicked out the politicians who oversaw the damage. And its economy has morphed from a disaster into an incredible success story, as financial alchemy was replaced by economic engines of fishing and tourism.
Unfortunately, there’s not much to say about Iceland that will calm anyone in the U.S. who’s angry about what happened here after the 2008 financial crisis. But it might provide a handy textbook for how to behave next time.
I oversee Fusion's money section and have spent most of my time as a journalist writing about banks and finance. I live in Brooklyn with my partner Geoffrey & our two dogs, Captain & Tallulah. Favs: leopard print, Diet Coke, gummy candy, Ireland.