Iceland President: "Why Do We Consider Banks To Be Like Holy Churches?"

Icelandic President Grigsson
(photo: http://www.forseti.is/)

In all the financial media's hoopla over the high-profile, big-think, but little-action event known as the World Economic Forum in Davos, Switzerland, one breath of fresh air emerged. That came courtesy of Iceland's president Olafur Ragnar Grimsson, whose nation painfully experienced fiscal disasters similar to those Lehman Brothers symbolized in the United States.

Grimson asks -- and answers -- not-so-rhetorical questions such as why banks are considered capitalism's sacred cows, too big to fail, too powerful to scrutinize, and too arrogant to question. The financial blog zerohedge.com posted on Grimsson's remarks. The post includes a video clip of the complete, three-minute interview of Grimsson.

The Icelandic president's comments and his line of reasoning are absolutely spot on. It's ironic his remarks came during the victory lap of one Timothy Geithner. The now former US Treasury secretary worked overtime to ensure America's largest financial institutions felt as little pain as possible for their acts of corporate folly. Instead, taxpayers were offered a poisoned chalice masquerading as a "solution" to the prospect of a second Great Depression.

Hank Greenberg

Former AIG chairman Hank Greenberg's disingenuous lawsuit against the Federal government approaches the chalice from an insider's perspective. In essence, Greenberg claimed the Federal actions, which essentially took over AIG, were designed to funnel money from the insurance company to major Wall Street institutions. Geithner played a very strong role in this situation, which included paying Goldman Sachs and other firms one hundred percent on the dollar for certain AIG instruments they held. What's unusual about that arrangement is that firms typically take a haircut on these fire sales. Greenberg asserted these actions were really a back-door bailout of Wall Street's "too big to fail" holy churches.

The corruption, which is at the heart of these issues, runs very deep. The excellent financial writer Bethany McLean notes that directions, such as jailing bankers, quickly enter deep waters that defy 
simplistic answers to these issues. One area which would impact the corruption, in her view, is to hit the bankers where they feel it -- their compensation. That approach, along with Icelandic president Grimsson's views, are useful starting points in what promises to be a long, difficult fight against very entrenched, powerful constituencies.