Report of EU delegation to Norway and Iceland on Deceptive Practises:
Prof. Kjetil Storesletten (econ. Univ. Oslo), has pointed out how Icelandic Banks circumvented the Basel standard for capital adequacy through deceptive practises.
Report of EU delegation to Norway and Iceland on Deceptive Practises (pdf)
The banks sent each other "love letters" - they'd lend each other reciprocal loans, balancing exactly.
This changes the asset and liability value equally in their books, but they can leverage against assets. So this multiplied their ability to take highly leveraged positions and disguised their lack of real capital.
Fine as long as they are operating independently, but catastrophic if there is a correlated collapse.
Hoocouldanode?
Stupid bastards.
It is not even clear this was illegal: just deceptive, unethical and moronic.
There was also significant self-dealing and use of subsidiaries to pump stocks and boost paper profits - which were then creamed off as bonuses and dividends.
They conclude that a group of no more then 30 bankers and businessmen manipulated the system, expedited by piss-poor oversight and deregulation, and basically looted the whole country.
Now we will want names.
And, my dear cousin (or two) better not be on the list.