Iceland let its banks fail rather than socializing their debts onto taxpayers

Evidence

Iceland had crossed the Rubicon without realizing it. It was now in no position to bail out its banks even if it wanted to, and it wasn’t in the euro so the ECB had no obligation to help. On October 6, 2009, the government passed emergency legislation that gave them the power to overtake troubled financial institutions, bypassing the central bank. Any plans the central bank harbored to bail the banks were now dead. The banks were to be allowed to go bankrupt and be taken into receivership. Their debts were not socialized; instead bondholders and foreign creditors bore the brunt of adjustment. — Mark Blyth, Austerity, 642

Categorization

• ADDENDUM: Directly feeds the On Sacrifice article’s framing of who bears the costs of collapse — here the creditors, not the citizen-taxpayers, are made the sacrificial party.
• XREF: connects to: Letting banks fail reversed Iceland’s two-decade inequality surge — Mark Blyth, Austerity: The History of a Dangerous…, 647; Iceland recovered quickly despite higher taxes after letting its banks fail — Mark Blyth, Austerity: The History of a Dangerous…, 645; Iceland and Ireland offer a natural experiment comparing austerity with bank default — Mark Blyth, Austerity: The History of a Dangerous…, 638

Broader Connections

• Letting banks fail reversed Iceland’s two-decade inequality surge #expands (0.85) — Mark Blyth, Austerity, 647
• Iceland recovered quickly despite higher taxes after letting its banks fail #corroborates (0.85) — Mark Blyth, Austerity, 645
• Iceland and Ireland offer a natural experiment comparing austerity with bank default #expands (0.80) — Mark Blyth, Austerity, 638