Iceland

Dear Colleagues

Last Thursday I met someone visiting New York from Iceland. As the world knows the banks in Iceland have become involved with the global banking fiasco and the Iceland banks and the Government of Iceland are now in a situation where every man, woman and child in Iceland is on the hook for an additional $16,000.

This is what contractual law ... banking law ... seems to have achieved. While a small bunch of bankers have taken risks to benefit essentially themselves, they have put enormous financial burdens on the population at large. And the bankers in Iceland, and the bankers in London and New York (and other banking centers) are spouting off about "rule of law" and the "sanctity of contracts" when the very concept of "equity" has been flaunted by all the decision makers and gamblers ... sorry bankers ... concerned.

I am absolutely appalled by the position of the bankers ... and their professional advisors especially lawyers. Though I have to admit to being totally disgusted with the performance of the global accountancy profession that seems to have been asleep or off the job for the best part of the last 25 years. The big question is who is going to "pay" for the debacle. I like the idea of "claw back" ... and even better if it was associated with the idea of "triple damages" that the US has (or had) in anti-trust and price fixing legislation. Two things that should happen: (1) bankers should be the ones to pay; and (2) ordinary people should be made whole.

Clearly this is not the way things are going ... bankers are getting back on a roll that nobody can understand ... and the real economy in the USA, Europe and many other parts of the world is going to get stuck in the doldrums. Just as the old industrial economies were able to "show" profit by outsourcing manufacturing to China and the neighborhood, and back office operations to India ... soon some of the real economy will get some modest growth because of the demand that is now outsourced to China, India et al. The banking industry has done untold damage to the national economies of the old industrial countries ... and profited mightily while doing it, especially in the United States and the United Kingdom.

There will not be any serious reform as long as there is no transparency and no accountability. This is not only a matter of regulation ... but also something to do with the ethics of society and the behavior of professionals in both law and accountancy. Most of the population wants a reformed banking industry ... only the bankers want the status quo ante. And it is entirely likely that they will be able to buy what they want from those with political power ... a terribly sad state of affairs!

Peter Burgess