Too-Big-to-Fail Prevention Is Tested in Post-Crisis Iceland | The Truth Behind the Headlines |
Iceland was brought to the brink of bankruptcy when its biggest banks failed four years ago. Now, the site of the world’s most spectacular financial collapse is becoming a pioneer in banking reform.


Iceland wants to bring in a form of Glass-Stegall when what they really need to be doing is overhauling their version of Freedie and Fannie.  It was their subsidizing housing loans with lower thna market interest rates which led to the banks being able to lever up that far, using securitization as the means by which to baffle the regulators with capital adequacy BS. 


The same things will happen again in Iceland eventually if they do not tie their currency to a hard asset and rein in their government's insistence on growth through home ownership.