The 1930s again: Jews are blamed for the crisis
US financier Bernard Madoff has given Jewish bankers a bad name
The credit crunch, financial crisis and ensuing global recession have provided an opportunity for the rebirth of some unfortunate antisemitic stereotypes. Jews have played a prominent role in the current crisis, and not just as perpetrators but as problem solvers and victims too.
The former Federal Reserve chairman Alan Greenspan, once regarded as a global guru for helping to steer the world out of inflation to a new era of prosperity, is blamed by many in the financial community for keeping interest rates too low for too long and contributing to the bubble which has now burst. His successor, Ben Bernanke, a practising Jew, has been on the front line of the battle to restore confidence using his academic expertise on The Great Depression to good effect.
If, as President Obama has claimed, the worst has now passed, it will be thanks to the Herculean efforts of Mr Bernanke, who has used the powers and resources of the American central bank to bring the US financial system back from the brink and refloat the economy. Unfortunately, however, some members of the Jewish community have done little to allay the suspicion that Jews are the source of the global meltdown.
The New York attorney general Andrew Cuomo recently filed fraud charges against hedge fund manager Ezra Merkin, alleging that he had funnelled $2.4 bn of investors’ money into Bernard Madoff’s Ponzi scheme in exchange for lucrative fees. Mr Merkin, described by the FT as “a leading figure in New York’s charity community” and a former chairman of GMAC — the General Motors financing arm — allegedly dispersed the funds from non-profit groups into Mr Madoff’s care.
The funds concerned included trusts belonging to the New York philanthropists Mort Zuckerman plus several Jewish charities. The writ charged that “Merkin betrayed hundreds of investors”, which is denied by his lawyers.
The Merkin/Madoff scandal is a gift to those bigots seeking people to blame for the most severe financial and economic shock to the global economy since the 1930s.
Biographer Ira Stoll, writing in the Wall Street Journal, reported an incident in his middle-class New York neighbourhood. A neatly dressed man was angrily cursing into his mobile, phone the mantra: “Jew Wall Street bankers”. In other words: it is Jewish financiers that are responsible for surging unemployment.
There is, of course, no denying that broker-dealers founded by established German Jewish families such as Lehman Brothers were at the epicentre of the leverage and toxic debt creation which triggered the financial crisis. But that does not explain why Wall Street’s wasp banks — Citigroup, Merrill Lynch and Morgan Stanley — were also affected. Nor does it explain the exploits of Sir Fred Goodwin at the Royal Bank of Scotland, the implosion of Northern Rock, or mistakes made by Halifax Bank of Scotland.
Yet despite these contra-indicators, showing that the credit crisis is not the result of the behaviour of any particular group, Jews could still find themselves in the front line. Robert Reich, the Labour Secretary in Bill Clinton’s administration and a respected chronicler of the present crisis, noted recently on his blog: “History shows how effective demagogic ravings can be when a public is stressed economically.” He warns that minorities including Jews, blacks and gays potentially could become victims of populist rage.
There is no shortage of historic precedent for this, dating back to the First Crusade. The historian of the Spanish Inquisition, Benzion Netanyahu (father of the current Israel Prime Minister), has noted that Jews were expelled because of a desire of the persecutors “to get rid of their debts by getting rid of their creditors”. Many Jews of the time were engaged in finance because other professions were closed to them.
The most severe historic case was in Austria and Germany, where the Jews came to be regarded as the representatives of a capitalist system which had failed its people.
Not much has changed, it seems. A poll by the Anti-Defamation League recently recorded an upsurge of the belief in continental Europe that Jews have too much power in the financial world.
It is no secret that financial houses of Jewish origin have been at the centre of capitalism for centuries: SG Warburg (now part of UBS), NM Rothschild and Lazard Freres, to name just three. But to suggest that the flaws of capitalism are the fault of the Jewish community and that the good things stem from the Protestant ethic is nonsense.
The current crisis is the result of a number of broader factors: the lax control of credit and asset prices by central banks, the search for yield by bankers and investors and greedy incentive arrangements.
Stirring up public anger can be dangerous, as seen when Fred Goodwin’s house was vandalised in Scotland. It is critical that scapegoating is not allowed to get out of hand.
Alex Brummer is City Editor of the Daily Mail