Suicides on Wall Street
The latest tragedy to come out of the Madoff scandal involves a man named Rene-Thierry Magon de la Villehuchet, a money manager who lost more than $1 billion of client money, including much, if not all, of his own family’s fortune. Just days after learning of the massive losses, he sat in his office in Midtown Manhattan and methodically slit both of his wrists with a box cutter, and bled to death.
De la Villehuchet's suicide adds yet another gruesome chapter to the Bernie Madoff Ponzi scheme. For the past two weeks, I’ve reported about the red flags that were missed by inept regulators who could have uncovered the massive fraud sooner, and saved money for countless victims, as well as evidence that Madoff couldn’t have stolen $50 billion all by himself. Then there is the human side of the story—the charities that lost millions; the wealthy and not so wealthy people who lost everything after they handed Madoff their life savings, because like any good scam artist he spent years earning their trust with lies that he could be trusted. And now a suicide from someone who lost everything.
Since the beginning of the year, the Dow Jones Industrial Average has fallen to roughly the same level it was 10 years ago. In other words, Americans are no richer now than they were in 1998.
There will be countless stories, profiles, and books written about the Madoff scandal. It will be billed as the financial crime of the century, which, based on everything I know, is probably true. But it’s also part of a bigger story that broke almost the moment 2008 began, when the financial world as we knew it started to fall apart, and the human devastation that followed. In a span of 12 months, two major securities firms employing tens of thousands of people—Bear Stearns and Lehman Brothers—were wiped off the map. Big banks like Citigroup, Morgan Stanley, and Goldman Sachs have survived, but just barely, and not without government handouts. Job losses are everywhere on Wall Street, and most people I speak to predict things will get worse.
The tragedy goes beyond the loss of jobs and wealth, because de la Villehuchet's suicide wasn’t the first human casualty to result from the financial implosion of the past year. I know of at least two other people who have taken their own lives because of the Wall Street meltdown. One was Barry Fox, a former analyst at Bear Stearns. People who knew Barry said work was his life. He was committed and loved his job at Bear, which he’d had since 1999. But in May, just weeks after the company imploded and JPMorgan Chase took over the failed investment bank, Barry was told he was one of several thousand people who would be out of work. Not long after, he went home and threw himself out of the window of his 29th-story apartment.
I didn’t know Barry Fox, but I did know Eric Von der Porten, who was a managing partner at Leeward Investments, a small and for a time successful hedge fund in Northern California. I ran into Eric because he was one of the first financial types who saw the hype in the dot-com market in the late 1990s and began questioning the research calls of analysts like Henry Blodget. He wrote to regulators demanding that they crack down on what he thought were fraudulent stock ratings. Stock analysts, he said, were publishing positive ratings only to help their firms win lucrative underwriting contracts from the very same companies they were rating.
Eric was talented and smart; what I loved about him was that he also had a sense of outrage. The story of biased stock ratings was bigger than a bunch of Wall Street types ripping each other off, he believed; these biased ratings were used by brokerage firms like Merrill and Citigroup’s Salomon Smith Barney unit to lure small investors into buying crappy Internet and telecom stocks. Eric also seemed to have his priorities straight. Unlike most people I know in the financial business, Eric gave up jobs at big firms to manage money not far from his hometown so he could dedicate some time to serving on the local school board.
Most recently, Eric, like just about every professional investor I know, lost a lot of money in the markets. He also took his losses particularly hard, and in early December, he suffocated himself to death.
When I took my first economics course 20 years ago, my professor went to great pains to alert the class that the stock market averages make a poor barometer for the economy’s health. Well, those days are long gone; today most people save through their 401(k) plans and are heavily invested in the markets. Since the beginning of the year, the Dow Jones Industrial Average has fallen around 5,000 points, to roughly the same level it was 10 years ago. In other words, Americans are no richer now than they were in 1998.
Smart people I know compare our current problems to those facing the nation after the crash of 1929. Financial ruin often pushes people to the brink; we’ve all heard of the suicides that occurred during the ’29 crash, when stockbrokers, after losing all their money in the market, flung themselves out of windows.
I don’t know all the demons that chased Barry Fox and Eric Von der Porton, or Rene-Thierry Magon de la Villehuchet, for that matter. In the case of de la Villehuchet, published reports suggest he went into deep despair when he realized that the man he trusted so much, Bernie Madoff, had stolen all his money and there was no way to get it back. In the cases of Barry and Eric, I do know that while they were highly functional people, some who know them say they both suffered from bouts of mental illness.
Still, these same people also tell me that the market upheaval and its personal impact played a critical role in enhancing their despair. The way things are going, I’m afraid there will be many more such incidents in the future.
I make my living writing and reporting about finance, the markets, and the people who work in them, so the last thing I’m going to do is suggest that they aren’t important. They are. Evaporating 10 years' worth of investment gains is serious stuff, and it’s something the new president must immediately address (read my lips: no new taxes!) The big players on Wall Street, people like Warren Buffett, Robert Rubin, Jamie Dimon of JPMorgan Chase, Morgan Stanley CEO John Mack, and Lloyd Blankfein of Goldman Sachs, are all smart, important men who run companies that are vital to our national economy.
But these people and the companies they control and the markets themselves didn’t deserve the reverence they’ve all been given over the past two decades, as we’re now discovering. By deifying those who don’t deserve it—never deserved it—we made their fall all the more tragic for them, and for us. Which brings me to something important that my friend and CNBC colleague, Larry Kudlow, recently told me during a recent segment. You probably won’t find a person who believes in the power of the markets and free-market capitalism more than Larry Kudlow. But Larry, upon hearing of the tragedies of Barry Fox, Eric Von der Porten, and Rene-Thierry Magon de la Villehuchet, went back to the time when he was at his lowest: He was battling drug and alcohol addictions, he was broke, and his marriage was on the rocks.
But he recovered through his faith in God, and because he realized that “it’s only money and money cannot be that important,” and that losing it “is not the end of the world, for heaven's sake. You’ve got families, and we all make mistakes.”
Charles Gasparino appears as a daily member of CNBC's ensemble. Gasparino, in his role as on-air editor, provides reports based on his reporting throughout the day and has broken some of the biggest stories affecting the financial markets in recent months. He is also a columnist for Trader Monthly Magazine and a freelance writer for the New York Post, Forbes, and other publications.