My own perhaps ill informed opinion is that the buck stops with Bill Clinton, who forced US banks to loan to high risk borrowers, the better to give those without hope of ever owning their own home a leg up. This resulted in the banks developing arrangements where the impoverished need to pay little up front, and were offered the assurance that by the time their payments rose dramatically, they could sell for a profit. Beware the law of unintended consequences.
No one seems to have seriously considered the flaw in this arrangement, which was that (as with every pyramid scheme) eventually it would not be possible to sell houses for a profit, and the US would be left with a nation of debtors who were no longer prepared to make payments on that debt.
That said it may well be that the Icelandic government really was neither aware or particularly interested in the internal workings of their own banking industry. It is the wise person who checks for defects in a system before they manifest themselves. And given the economic prosperity that the banking sector offered Iceland, it would at the time have been perhaps seen as looking a gift horse in the mouth to question the source of that prosperity.
I am very grateful to my own federal government for its regulation of the Canadian banking system. While it almost certainly resulted in our banks being denied the opportunity to play roulette with our nations funds, it as certainly ensured that our banks never bought into the types of high risk debt that came close to derailing the US and British economy, and did derail the Icelandic economy.
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