"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".
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.
Source:
by
Geraint Anderson
www.guardian.co.uk
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