The Observer, Sunday November 9 2008
The Buckinghamshire coroner has yet to hear the case of Kirk Stephenson, but Fleet Street already knows why he threw himself in front of an express train. He was the “first City suicide of the credit crunch” (the Mirror). His death ‘evokes memories of the 1929 Wall Street crash’ (the Mail).
He had had it all, the £3.5m town house in Chelsea, the loving family and the fine wine and exotic holidays. Then the bull market crashed, shattering his dreams and illusions. His investment company, Olivant, revealed that it had bought £700m-worth of shares in the Swiss bank UBS. It deposited them with Lehman Brothers, which promptly went bust. So there you seemed to have it: a man cracking as unimaginable losses engulfed him.
Meanwhile, rumours abound about how badly Mayfair financiers were pummelled when the carmaker Porsche realised the dream of speculators down the centuries and cornered the market. Hedge funds had gambled that the price of VW shares they had shorted would fall. They then found that Porsche owned three-quarters of the stock, and had to honour their bets by buying shares that had quadrupled in price. One fund manager described running through the streets of London “like a madman” when he realised what Porsche had done. A financial analyst said he had had “hedge-fund managers in tears on the phone”, raving about “a nuclear bomb going off in our faces”.
A banker told me that she worried about people further down the financial pecking order: middle-ranking dealers who had grown used to receiving generous bonuses. They had sent their children to private schools, and taken out vast mortgages. “They made hundreds of thousands but lived as if they were making millions,” she said. Now hard times were here, how were they to cope with the loss of face and status, as they pulled their children out of class and realised that they had leveraged themselves to the hilt for properties that were falling in value.
If their stories end badly, I am sure they will attract an audience. The public has wanted to hear tales of avarice humbled after the implosion of every bubble in capitalist history. Occasionally, they are satisfied. The collapse of the South Sea Company in 1720 ruined early Georgian England. Charles Blunt, the cousin of John Blunt, its rapacious founder, committed suicide, while the Commons tried to assuage a furious citizenry by sending the Chancellor of the Exchequer, John Aislabie, to the Tower for his light-touch regulation of a demented market.
The BBC is running a timely adaptation of Little Dorrit, in which Dickens has politicians and London high society fawning over the crooked financier Mr Merdle until his empire crashes, and he takes his life. Dickens loosely based Merdle on George Hudson, the “Railway King”. As the mania for railway shares passed in 1846, and his companies began to crack, not Hudson but his brother-in-law and fellow director did indeed greet the ruin of his schemes by throwing himself into the River Ouse at York.
And, of course, everyone knows that bankers jumped from skyscrapers after the great crash of 1929. Or did they?
In Devil Take the Hindmost, his essential history of financial manias, Edward Chancellor says that accounts of mass suicides in the bourses are urban myths. With the economy wrecked and the world turned upside down, they fill a deep popular need to believe that speculators have paid the price of flying too close to the sun. Several prominent financiers took their lives after the Wall Street Crash, but they killed themselves years later, when all hope of restoring their fortunes had gone. The stories about investors jumping from skyscrapers do not come from police reports, but from Eddie Cantor, the most popular Broadway comedian of the day. He joked about hotel receptionists asking guests if they were there “to sleep or to jump” because he had lost a million dollars in the markets, and developed an understandable taste for black humour.
The cautionary tales of the great crash of 2008 may also turn out to be far too pat. The motives for suicide are not usually neat, but dark and complicated. We will have to wait for the inquest into Kirk Stephenson’s death next month, but I found that his friends were horrified – but also baffled. The crash had not destroyed him. His house was not about to be repossessed. Olivant may yet recover its lost shares. This wasn’t the end of the world.
As one perplexed City source put it: “If every banker who lost money this year were to kill himself, the cemeteries would be heaving.”
Suffering is not a competition. A bankrupt banker is as deserving of sympathy as anyone else. But the hope that the fallen rich will provide morality stories draws attention away from the real casualties of bubble markets. Last week staff at the Royal Bank of Scotland read unconfirmed reports that 16,000 jobs may go. The cashiers and call centre workers cannot absorb the shock of unemployment by pulling their children out of private school or trading down from a mansion to a semi. They have no fat to cut. The Unite union told me they would have been lucky to make £18,000 a year.
Sir Fred Goodwin, their former chief executive, is now a disgraced man, but as he also collected salaries and bonuses totalling £20m during the bubble, I am sure he’ll live.
Gordon Brown used to be a social democrat who had read his Keynes and his Galbraith. He once knew that left to its own devices, finance capital would bring the roof in on the rest of society. For all the plaudits the press is now throwing at him, his failure to regulate the greatest speculative madness of our lifetime remains an indelible stain on his reputation. Like the Georgian politicians who cheered on the South Sea Bubble, or their Victorian successors who abased themselves before the railway kings, easy money and slick speculators dazzled him. It would be a morality tale worth reading if he paid the political price.