New book Iceland’s Secret: The Untold Story of the World’s Biggest Con by international financial investigator Jared Bibler is a must-read for those interested in financial corruption on a massive scale, the shocking extent of human greed, and how an ongoing failure to address white-collar crime could result in a second, far worse global financial crisis in the coming years.
Everyone is familiar with the global financial crisis of 2008. The unchecked practices of predatory and easy lending coupled with fraudulent underwriting caused a perfect storm which plunged the world into recession, with the shockwaves still being felt today.
As the dust settled, a plethora of books such as The Big Short: Inside the Doomsday Machine by Michael Lewis and Too Big to Fail: Inside the Battle to Save Wall Street by Andrew Ross Sorkin appeared to forensically analyse the crisis, and what had precipitated it.
What may be less familiar is the story of the financial crash that hit Iceland in 2008. Barely reported outside of the country, it was nevertheless involved one of the world’s largest historical banking collapses and one of the world’s largest financial crimes.
The Icelandic financial crisis dwarfed the crash of both Enron and Northern Rock, seeing the nation’s three largest banks – Kaupthing, Landsbanki and Glitnir – collapse within the space of four days.
The economic impact was huge. Not only did the country’s stock market crash, but Icelanders with stock portfolios lost their savings, while bank accounts were frozen, unemployment rocketed and mortgage payments doubled.
Iceland’s Secret: The Untold Story of the World’s Biggest Con, which has just been published through Harriman House, reveals the true story of the Icelandic financial crisis for the first time.
And there’s no one better to tell this shocking tale of egregious corruption, insatiable greed, and alarming complicity than American author Jared Bibler, the international financial investigator who led the inquiry into the collapse and who brought the banks to justice after uncovering the world’s largest stock market abuse scandals ever to be prosecuted.
A graduate of MIT, Bibler started his career as a consultant to a Wall Street giant.
He moved to Iceland in 2004 where he supported the Icelandic pension funds’ foreign investments but, growing unhappy with this environment, he resigned from his job at asset management company Landsvaki just days before the Icelandic financial crisis in late 2008.
He was subsequently hired to head a special investigation team at the Icelandic markets regulator, the Financial Supervisory Authority (FME)—a role he would continue in until the FME was unceremoniously shut down in 2011.
As related in Iceland’s Secret, the story really kicks off in April 2009—six months after the crash—during Bibler’s first week on the job.
Dubbed the ‘only foreigner in Iceland’ , the CFA charterholder’s 20 years’ experience in global financial markets had been telling him for some time that there was something deeply suspicious about Iceland’s relatively-recent economic prosperity leading up to the crash.
He had always wondered why, for instance, so many people drove shiny SUVs, and why there was always a fleet of private aircraft cuing up at Reyjavík City airport.
More besides, just who was going to live in the swanky new apartment blocks being built at pace in the capital, and—most importantly—why, exactly, did the main stock exchange index keep going up?
Not wishing to rock the boat, he had kept his worries and suspicions to himself but, now employed by the market regulator, he finally had access to the files that could answer his suspicions, and had full authority to do so.
As he began his analysis, Bibler quickly detected strange trading patterns within Iceland’s oldest bank, Landsbanki. Investigating further into the figures, he could hardly believe the picture that was being painted: the bank appeared to have been scooping up its own shares since when it had first been listed on the stock market a decade before.
He soon uncovered that, in the three days prior to Landsbanki’s collapse, traders had used the bank’s money to buy every single one of the shares that crossed the market in a desperate last-minute bid to get out of the huge financial pit they’d dug for themselves.
In the book, which Russell Napier, the bestselling author of Anatomy of the Bear describes as “Nordic noir but with bankers going to jail”, Bibler compares this outrageous, and criminal, practice as akin to a supermarket owner—seeing that nobody is buying his tomatoes—hiring actors to queue outside his store to up the value of the produce with the company’s own cash.
It won’t come as a surprise to say this ploy failed . . . spectacularly.
Bibler couldn’t believe that this illegal activity hadn’t been detected earlier, either by the bank itself, the regulator, or the Nasdaq OMX stock exchange.
As the investigation continued, he would find that those at the top had been deliberately turning a blind eye to their own team’s rogue trading, happy to see profits, and their own fortunes, continue to boom even if only on paper.
And it led Bibler to expose just how how rotten and fragile Iceland’s three chief financial institutions had been, with hidden shares, astronomically-high borrowing, and huge loans from increasingly reluctant European banks all swept under the carpet.
In total, Bibler and his team referred more than 30 criminal cases to the Special Prosecutor of Iceland, with criminal convictions for the heads of all three banks and a handful of lower-level executives.
Perhaps more disgraceful, the criminal trail ran all the way to Iceland’s parliament, with ex-prime minister Geir Haarde becoming the first world leader to face prosecution, for criminal negligence, in relation to the global financial crisis.
A decade after the investigations, and with most of the criminal cases now through the courts, the shocking true story can finally be told at last and in full.
And move over, Michael Lewis because Iceland’s Secret is a revelation, and is gripping enough to make a movie.
You could say it’s like The Big Short, but bigger—offering a fresh perspective on the wider 2008 financial crisis, replete with colourful characters and eye-popping insights, and benefitting immensely from the author’s unique insider position as lead investigator.
The book is accessible and engrossing—narrating one man’s immersive journey into the murky world of Iceland’s financial underworld—and it is arguably the best thriller you’ll read this year.
Moreover, it behoves readers to dive in as Bibler makes clear that Iceland’s financial crisis should be seen not as a local issue but as a poster child for global white-collar corruption.
He calls, among other things, for immediate regulatory reform to turn regulators from largely toothless tigers into roaring lions that can protect the public from its own financial institutions.
If this does not happen then he fears that the second, far worse global financial crisis could be just around the corner.
All told, Iceland’s Secret deserves to be disclosed far and wide . . . for all our sakes.
