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A catharsis in international banking is almost complete.
The timeline for the Lehman reparations seems to be roughly equal to that of the other international institutions that were rescued by their governments. Iceland only announced in June how it would compensate Britain and the Netherlands for the losses to local investors when Iceland’s IceSave internet bank failed last fall. IceSave is part of Landsbanki, one of three Icelandic banks that were nationalized last October when they nearly collapsed under the weight of $60 billion in foreign debt.
Under the proposed IceSave deal, Iceland will cover $5.5 billion in deposits for some 200,000 British and 120,000 Dutch savers who were hurt by Landsbanki’s involvement in the sub prime crisis.
Both IceSave and Lehman received significant international excoriation. Investors in Hong Kong flooded the streets last fall to demand repayment. In Britain, Prime Minister Gordon Brown ordered Iceland’s assets frozen under a section of Britain’s anti-terrorist statutes. Icelanders are still smarting from being compared to Al Qaeda.
But the Lehman resolution does not drag taxpayers, in the country where it is headquartered (the U.S.), into some overblown rescue scheme. Instead, it puts responsibility where it belongs, on the shoulders of the management, employees, shareholders, investors, business associates and regulators worldwide who enabled the company to operate in the first place.
Catharsis prevents any one country from being hobbled by the reckless management of an international financial class that is too creative for its own good.
Susan E. Reed has covered business and international affairs for CBS News, The New York Times, The New Republic and other news organizations.
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