Irreverent Economics

Kaupthing. They used the lending of last resort (LOLR) they availed themselves of from the Central Bank of Iceland, not for such conventional uses as, well, staying solvent, but to relend to other non-financial firms with close connections to the owners of Kaupthing and its senior managers.

No wonder the former CEO of Kaupthing is subject to an Interpol arrest warrant, and the rest of the senior managers are in jail. (the CEO justified his high bonuses by the fact that he was in such high demand internationally, right surely about the demand, but what he got wrong is by whom)

Now, one might wonder why did the Central Bank of Iceland acquiesce to such LOLR, we don’t know, even if I have my suspicions.  I predict no jail for the guys there because of this, or even a downward change in employment status.