How did a chilly nation of cod fishermen play a key role in the world's crumbling financial markets? Seeking to avoid the boom-and-bust of fish catch, Iceland started by privatizing banks in the mid-1990s. It built a colossal banking system on a puny currency and attracted international deposits with high returns. Then the country went on a shopping spree. "I didn't really worry about money," said one banker, who is now laid off.
Populated by fewer people than Wichita, Kansas—and some who still believe in alfar, or elves—the nation was unable to refinance its debts when the Wall Street crisis struck and sparked a run on deposits. The Wall Street Journal chronicles the dying days of Iceland's top three banks, as the currency sank and depositors from Britain to Beverly Hills took massive hits.