It’s easy to forget that the financial crisis was not simply one of American financial institutions getting into trouble; banks around the world found themselves on the brink of failure. One of the more interesting cases is Landsbankinn, a privately owned bank in Iceland. Landsbankinn also operated a branch in Britain and the Netherlands called “Icesave.” When Icesave failed in 2008, the British government rushed in and covered the deposits of its British savers — a move that was neither requested by Landsbankinn or the government of Iceland. Now the Brits are demanding that Iceland pay them to cover those expenses.

For a brief moment it looked like that was exactly what was going to happen, as the legislature in Iceland passed a bill to pay off the Brits. Sensing the public opposition, Iceland’s president blocked the bill. This is likely to lead to a public vote by the people of Iceland on whether they want to cover the losses of British depositors in Icesave.

Britain had no legal basis for seizing Icesave assets in the UK, nor did depositors in Icesave have any right to have their losses covered. If England wants to bail out its citizens, that is its business. Asking Iceland to foot the tab afterwards sets a dangerous precedent.

But then at least the citizens of Iceland are getting a vote on whether to bail out or not. By comparison, both U.S. Treasury Secretaries Paulson and Geithner have decided that U.S. taxpayers must honor foreign investments in Fannie Mae and Freddie Mac, even if those investments were explicitly not insured by the U.S. government. Perhaps the U.S. could learn a little about democracy and accountability from Iceland.