by Stefan Theil
During the financial panic of 2008, the Swiss had more reason than most to be frightened. The country’s banks, dominated by Credit Suisse and UBS, held assets worth an incredible 680 percent of Switzerland’s GDP (compared with U.S. commercial banks’ assets of 70 percent of GDP). No one knew how many of the Swiss holdings were toxic. What everyone knew was that these banks were far too big for tiny Switzerland to bail out in any full-blown banking crisis. Capital flight would crush the Swiss franc and the country’s economy right along with it. There were scary parallels to Iceland, another small nation with an independent currency and outsize global banks. After a severe blowout, Iceland is now in a deep recession and on life support from the IMF.