An International Battle Over One Of The Most Boring Things In Finance
This week saw the end of a years-long, international, multi-billion-dollar battle over one of the most boring things in finance: savings accounts.
At the center of the battle was Iceland, a tiny country where the banks grew into international behemoths during the credit bubble.
The banks got so big partly by convincing foreigners to open up online savings accounts. In particular, lots of people in England and Netherlands opened up "ICESAVE accounts" with a bank called Landsbanki. During the financial crisis, the bank collapsed.
The government of Iceland stepped in to make sure everyone in Iceland got their money out of their ICESAVE accounts. But the government didn't do the same thing for the British and Dutch people who had put their money in the bank.
The British and Dutch governments stepped in and made whole their own citizens who had lost money in the accounts — but they also promised to try to get the government of Iceland to pay them back.
Eventually, Iceland held a national referendum to decide whether to pay back the British and Dutch governments. The people voted that, no, Iceland should not repay the foreign governments. ( Here's our story on the referendum.)
After that, the British and the Dutch took Iceland to court, to try to make the government pay. The ruling came down this week — and, basically, Iceland won. (
This Reuters story has more details.)
I talked this week with Baldur Hedinson, a former Planet Money intern who grew up in Iceland and lives there now.
In the referendum, he voted in the minority: He thought Iceland should immediately repay the British and Dutch governments.
But, when I talked to Baldur this week, he told me his thinking had changed since then. At the time of the referendum, he worried that if Iceland refused to repay the British and Dutch, the country would be shut out of the world economy and would suffer as a result.
But that hasn't happened.
"Our economy is doing OK," Baldur told me. Things there aren't perfect, but Iceland hasn't been shunned. And the court's verdict this week validates the country's decision not to repay the foreign governments.
'"When I look back," Baldur said, "I think I voted the wrong way."
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