How Did Iceland Clean Up its Banks (And Why Can't We)?

At 4pm on 6 October 2008, as the global financial crisis ravaged Iceland’s economy, its prime minister addressed the nation. "There is a danger, fellow citizens," he said, "that Iceland could be sucked into the whirlpool and the result could be national bankruptcy. It was decided this morning to suspend trading with the banks. God Bless Iceland.”

The message was clear. Iceland was about to do what no other country had done - let its banking sector fail. And that was only the start. Over the coming years, Iceland would go on to do much more - clean up its banks and prosecute many senior bankers. And the story is still unfolding. Just two months ago, five more bank executives were jailed. So how exactly has Iceland done it? What happened next to Iceland’s economy? And why aren’t other nations following Iceland’s example?

(Photo: Protest against the Icelandic government 29 November 2008 in Reykjavik. Credit AFP/Getty Images)