Q&A | Iceland seeks help of Yale professor
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,...
"We have a strict regulatory system in America, whereas the Icelandic banks were allowed to do things that should have been regulated."
I am sure that Mrs. Benediktsdottir will retract this statement once she has done her research on the (Icelandic) banking system. The assumption that you can buy assets/houses (using leverage) and always make (large) positive returns is what caused this financial crisis everywhere. The Icelandic people just assumed they were better at it than anyone else. Please read http://www.vanityfair.com/politics/features/2009/04/iceland200904 for a nice analysis of the Icelandic problem.