In 2002. Iceland's Prime Minister David Oddsson, a follower of the economic theories of Milton Friedman, privatized the banks.

Over the next three and a half years they grew to over $140 billion and were so much greater than Iceland's GDP that it made no sense to calculate the percentage of it they accounted for. It was, as one economist said, 'the most rapid expansion of a banking system in the history of mankind.'

The BBC reported that "Both households and firms had borrowed extensively in foreign currency " and Michael Lewis, reported
"By 2006 the average Icelandic family was three times as wealthy as it had been in 2003, and virtually all of this new wealth was in one way or another tied to the new investment-banking industry."

During the 1990s the island of some 300,000 inhabitants was converted into the 'analogue of a highly leveraged hedge fund'


The difference between this situation and Bernard Madoff was the 'legality'

Bernard L. Madoff entered a federal courtroom in Manhattan and admitted in public that he had run a vast Ponzi scheme that robbed thousands of investors of their life savings
"I knew what I was doing was wrong, indeed criminal," he said.


However, Sigurjón Árnason the chief executive of Landsbanki , the parent company of Icesave, has been questioned by the Icelandic special prosecutor over the events leading up to the bank's collapse it was reported yesterday

He was among 10 people, including Landsbanki brokers, questioned over allegations that the bank lent an Icelandic investor, Magnus Armann, 5bn krona (£24m) to buy shares in the bank itself with no security.
The board are believed to deny knowledge of the loan.

"It is part of a growing investigation by the Icelandic authorities about "suspicions of criminal activity" surrounding the failure of Kaupthing, Landsbanki and Glitnir that wiped out the deposits of hundreds of UK councils and charities." wrote Rowena Mason in yesterday's Telegraph

Earlier Iris Erlingsdottir
Icelandic journalist and writer had said in the The Huffington Post

"The mind-set in Iceland's business community before the banks' collapse was, as Bob Dylan once put it, "anything's legal, as long as you don't get caught."

How Iceland's Lawyers Enabled Fraud

"According to recent news reports, the former (he resigned last week in the light of "the misleading debate about his part" in the bank's decision about the loans) chief counsel at Kaupthing Bank, Helgi Sigurðsson, provided the board of directors with a legal memorandum that concluded that the insiders' personal responsibility for the loans could be written off if things fell apart, though I assume they would reap any financial rewards occurring if the bank's stock continued to rise."


"Just as the physicians of famous people from Elvis Presley to Michael Jackson poisoned their patients by providing an endless supply of illicit drugs, so the lawyers poisoned Iceland's business and regulatory atmosphere by justifying their clients' unjustifiable deeds"