On a Friday, Jared Bibler’s friends at the bank threw him a going away party, with cakes from one of the finest bakeries in Reykjavik. On Tuesday, the bank collapsed.

If that feels like a whipsaw, it’s partially because Bibler wants you to know how he felt. First as a private equity and hedge fund manager and then as an investigator for Iceland’s securities regulator, Bibler is one of the few people on earth who got two front row seats to watch the scenery collapse in the Great Recession.

His new book, Iceland’s Secret, is his own attempt to wrestle with the carnage, and to warn the rest of us that we could well be next.

“This case is a petri dish about the economic system of the world,” he told affiliate title Regulatory Compliance Watch in a Zoom interview. “This is the kind of manipulation that keeps the system going.”

Icelandic carnage

Few places on Earth were spared the ravages of the Great Recession, and few were ravaged as much as Iceland. “Its three giant banks fell over in one week,” Bibler writes in the book, “quickly engulfing the whole economy… The value of the currency dropped by half.”

In just a few months, Iceland’s stock market – the Nasdaq OMX – lost 97 percent of its value. Unemployment quintupled. Bibler himself was one of many who lost his home. It was Year Zero.

“The setback was not just huge,” Bibler writes, “it was lasting; the country can still feel the crisis more than a decade later. The quick drop-off in the currency kicked off a tourist invasion that, while initially providing a much-needed economic boost, has reduced Iceland to a giant T-shirt shop. Meanwhile, those who lost their savings and their homes never got them back. Forced to start over from zero, many fled the country for better opportunities abroad.”

Bibler is one: He now lives in Switzerland, more than a thousand miles from the adopted country he loves so well.

‘Take the knobs off’

So what happened to turn an island nation of 350,000 souls into a charnel house of the world economy (combined, the collapse of Iceland’s banks is three times larger than Enron’s, in a nation 1,000 times smaller than the US)?

“It’s what happens,” Bibler tells RCW, “when you take compliance and just take the knobs off.”

In essence, Bibler says, Iceland’s three banks were running a casino where no one ever lost. With a stable government, copious European credit and a constantly rising currency, Iceland was practically drowning in cash in the early aughts.

Bibler says he marveled at the number of private jets he saw taking off and landing from Reykjavik, the luxury SUVs being off-loaded on the docks. On one of his numerous shopping trips back to his native Boston, he found himself in a tacky suburban mall filled with Icelanders – including an entire elementary school faculty – buying everything from iPods to snow tires with other people’s money.


Bibler had consulted for Morgan Stanley in New York and Tokyo in the late 1990s and early aughts. He wants us to know he was skeptical about Iceland’s “miracle”. Anyone who asked rude questions, though, was quickly confronted with a kind of cold Icelandic exceptionalism.

Within two weeks in early 2006, for instance, Merrill Lynch and then Danske Bank issued reports that Iceland was living beyond its means. Merrill called Icelandic business arrangements “downright shady” and Danske labeled Iceland’s economy “the most overheated in the world”. Most ominous, Merrill warned that two-thirds of the Nasdaq OMX were tied up in the nation’s three largest banks.

The reports briefly dented Iceland’s shield – both the stock market and the Icelandic krona lost 20 percent of its value. Icelanders took it all as an affront to their national honor by jealous “outlanders”.

‘This loser’

Up until that point, Bibler watched from afar. He worked at a fintech start-up, writing line upon line of code. But at a billiards-and-darts party in a friend’s garage in late 2006, he met a guy with a ready-to-pour British accent. He was “impeccably well-dressed”, Bibler recalls, with “perfectly cut jeans, perfectly tucked-in shirt, perfectly coiffed hair piled up lovingly with mousse”.

The guy had friends at Landsbanki, one of the big three, and Bibler told him he was looking for work. To his surprise, Bibler got offered a job in the asset management division.

He wasn’t supposed to get the job. Bibler learned later that Mr Perfect had only given up his card so that he and his colleagues could “laugh at this loser”. Nonetheless, Bibler found himself managing hundreds of millions in private equity and hedge funds, traveling on luxury junkets to Madrid and occasionally letting himself dream about maybe getting a private jet himself.

In the belly

It wasn’t long, Bibler writes, before he was shaken from his reveries.

He found himself being ordered to manage deals where compliance wasn’t even an afterthought: Here, the advertising “guys” cut and paste a marketing brochure substituting euros for krona even though the two currencies offer vastly different returns. There, a shopping mall project with an investment company that somehow never gets off the ground. Here, a series of wire transfers to “some Norwegian dude”.

When he brought his worries to his bosses, Bibler found that he was the bad guy. “Why do you always make problems, Jared?” his boss once asked. “Bring me solutions!”

By the summer of 2008, Bibler writes, he was no longer sleeping. His nerves were fried. One morning his fiancé turned to him and said, “Don’t let those a******* fire you. You should quit.”

He got out just in the nick of time.


He had been gone six months before Iceland’s regulator, FME, came calling. He would learn, through months of painstaking work – and again, over the frigid obstruction of his adopted countrymen and  women – that things were even worse than they seemed.

All three banks, it emerged, had been buying up their own stock since at least 2004. They’d offload the shares into front companies taken out in the names of wealthy customers who’d paid them to manage their funds.

The phony funds started in Iceland but eventually migrated to the Caribbean among other destinations. They also offloaded them onto their own employees against loans, or to off-balance sheet vehicles financed directly by the banks. The banks would then issue dummy loans to the dummy companies to “pay” the stock buys back. It allowed the banks to inflate their balance sheet until they popped the entire economy.


Today, Bibler acknowledges that he might “be seeing ghosts” when he warns the rest of us that we all face an Icelandic future. But as he sees it, the problem with the world economy is the incentives are all on the wrong side of the balance sheet.

“If you’re going to do an M&A and you’re going to a share-for-shares deals, then it behooves you to goose the shares in the offering company,” he says. “You may only have to invest a few million bucks to get a payout a few months later when the deal’s announced.”

Bibler is a charter holder with the CFA Institute, and he urges firms to adopt its code of ethics post haste. Meanwhile, he’s encouraging regulators and firms alike to find ways to realign incentives.

“What about the incentives for the whistle-blowers or the regulators to come in and shut that down? They’re not there,” he says. “I am a believer in markets. But they have to be reined in or they’ll run wild on you.”

This article first appeared in affiliate publication Regulatory Compliance Watch