[FoRK] Did cocaine use by bankers cause the global financial crisis?
gojomo-forkxent at xavvy.com
Sun Apr 21 09:19:36 PDT 2013
Financiers have been using copious amounts of cocaine for decades, so I
don't think this uniquely describes the 200X binges. Maybe SSRIs among
borrowers and regulators, instead?
On 4/19/13 1:10 AM, Stephen Williams wrote:
> Did cocaine use by bankers cause the global financial crisis?
> Coked-up bankers caused the credit crunch, according to the former drug
> tsar David Nutt. One former City worker can well believe it
> Cocaine usage
> Cocaine: usage among bankers has been said to be commonplace in the City
> and Wall Street. Photograph: Rex Features/Simon Webster
> "Wall Street got drunk" was George W Bush's typically incisive take on
> the main cause of the emerging financial crisis in July 2008. Two years
> later the governor of the Bank of England, Mervyn King, explained in his
> Mansion House speech that "the role of a central bank in monetary policy
> is to take the punch bowl away just as the party gets going" (something
> that he admitted had not occurred). But perhaps the wrong intoxicant was
> being blamed. The controversial former drug tsar David Nutt told the
> Sunday Times this weekend that cocaine-using bankers with their "culture
> of excitement and drive and more and more and more ... got us into this
> terrible mess".
> Payback Time
> by Geraint Anderson
> I'm inclined to agree. Cocaine is (I'm reliably informed) a drug that
> results in intense bouts of over-exuberance as well as a tendency to
> talk extremely convincingly about stuff you know nothing about. Everyone
> accepts that a credit bubble occurred in the mid-noughties and that it
> was a direct result of what the former US Federal Reserve chief Alan
> Greenspan has referred to as "irrational exuberance". It could also be
> argued that traders would be better able to sell absurdly complicated
> financial weapons of mass destruction after taking a confidence-boosting
> narcotic such as cocaine. Furthermore, surely only cocaine-ravaged
> buffoons would actually buy billions of dollars worth of mortgage-backed
> securities when they were so clearly doomed to explode the minute the
> property boom stalled.
> I certainly saw my fair share of sniffly noses and gurning jaws at City
> bars every Thursday night. I also heard overconfident gibberish being
> spouted by brash wide-boys throughout my 12-year banking career. There
> were also lots of stories about some of the big swingers in New York
> enjoying a line or 10 of an evening. Bernie Madoff's office was
> apparently known as "the North Pole" such were the gargantuan quantities
> of "snow" to be found there and most bankers are aware of the published
> allegations that Jimmy Cayne (former CEO of Bear Stearns) had an
> anti-acid medication bottle that was filled with cocaine.
> Dr Chris Luke, an A&E specialist based at Cork University Hospital,
> Ireland, who has studied the effects of cocaine on bankers, has stated
> that "prominent figures in financial and political circles made
> irrational decisions as a result of megalomania brought on by cocaine
> usage". He concludes that "people were making insane decisions and
> thinking they were 110% right … which led to the current chaos."
> Greed, selfishness, ignorance and ruthlessness also played their part,
> of course, but I think it would be foolish not to see the role that the
> drug played in creating the bubble. Herd mentality, which thrives during
> times of uncertainty, is certainly much more explicable when you factor
> in the trembling insecurity and depleted discernment that go hand in
> hand with a coke habit.
> There is, I'm pleased to say, a happy ending to this sorry tale: my
> ex-colleagues and clients who still work in the Square Mile tell me that
> many City boys are now too scared to keep snorting the Bolivian marching
> powder. This may mean bankers are having less fun but, surely, it can
> only lead to a more restrained and sensible financial system.
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