On October 6, 2008, Iceland’s then–prime minister, Geir Haarde, went on television to tell his countrymen that the nation’s financial system was on the verge of collapse.
Haarde explained that Iceland’s largest banks—Kaupthing Bank hf., Landsbanki Íslands hf., and Glitnir Banki hf.—collectively owed debt worth many times the nation’s gross national product. The banks’ profits, fueled by a decade of cheap money, had “been something akin to a fairy tale,” Haarde said. After the implosion of Lehman Brothers Holdings Inc. and the deep freeze of global credit markets, the banks could no longer roll over the short-term notes critical to their day-to-day functioning. The bankruptcy of the entire nation, Haarde said, was “a very real danger.”
