On the 12 May, 1866, the leading article of The Times reported breathlessly that in the City, “a tumult became a riot.....as a mob besieged the most respectable banking houses...making the narrow thoroughfare of Lombard Street impassable.” What was later termed The Great Panic of 1866 was caused by the crash of Overend, Gurney & Company, a London wholesale discount bank, known as "the bankers' bank", which collapsed owing about 11 million pounds sterling ($1.3 billion at 2007 prices).
This was the third British banking crisis of the nineteenth century. The first crisis was in 1825 and caused by a severe stock market crash which led to numerous banks failing, nearly including the Bank of England.
However, the Panic of 1866 was to form a notable watershed. There was not to be another banking run until September 2007. Northern Rock, one of the top five mortgage lenders in the United Kingdom, sought and received a liquidity support facility from the Bank of England following emerging difficulties in the credit markets. When this was reported, customer confidence in the Bank vanished and this led to the incredible spectacle, on 14 September 2007, of many customers queuing outside branches to withdraw their savings. On 22 February 2008, the Bank was taken into state ownership.
The run on Northern Rock marked the beginning of the credit crunch in the United Kingdom. Simply defined, this is the ongoing financial crisis triggered by the significant decline in housing prices and related mortgage payment delinquencies and foreclosures in the United States. The resulting ripple across the financial markets and global banking systems has caused a severe decline in overall liquidity as financial institutions have tightened their lending practices.
Although numerous forecasts have been made in the British media and elsewhere, as to how much worse things will get, the truth is no one knows. However, nearly all forecasters are agreed on one fundamental issue, it will get much worse before it gets better.
Last week, a series of grim predictions were made. The United Kingdom would see over three million unemployed within two years and London would be worst affected with at least 650,000 out of work. Meanwhile, the British stock market has continued to drop to 1997 levels, with no sign of improvement. Whilst property prices and general business confidence are in freefall, the number of foreclosures and insolvencies are increasing rapidly.
The Jewish community is by no means immune to the financial crisis and there is a very palpable concern. My father, a retired university lecturer, watched the anxious customers outside the Northern Rock Savings Bank in the Golders Green Road and was startled by what he saw. “I recognised several of them – many were wearing kippot. They were only able to withdraw money after about seven hours of waiting.” Others thought they were cleverer; their cash was earning nearly 7% in two Icelandic banks. However, they did not escape either. In October 2008, the British Government effectively bankrupted Kaupthing and Her Majesty’s Treasury froze the assets of Landsbanki. Confidence in all banks has continued to plummet and it was reported recently that there is now a shortage of £50 notes as people begin to hoard them.
At the other end of the wealth scale, the various Jewish masters of the financial universe have been reduced from being billionaires to mere millionaires or even worse. The favourite dinner party topic is no longer the price of your house but whether a particular individual can hang on to his or her job. Anyone connected to the Financial Services industry is racked by profound angst and disbelief. This is all true of the general population but probably more so among the United Kingdom’s Jewish inhabitants.
For anyone working in property, the world is a frightening and unpredictable place. Andrew, a 41 year old surveyor, living in Edgware, North London, captured the mood accurately. “Many surveyors have lost their jobs. Those who have not face worry and uncertainty. I meet estate agents every day who say they will run out of money by the end of the year if things don't pick up. Every time I return to an area I haven't visited for a while, another estate agent has closed. Everyone in our community is anxious. We are in a prosperous area, but so many jobs and companies are dependent on property or investments. The younger families inevitably have larger mortgages and are having to cut their expenditure. Many people are worried about the cost of holidays to Israel and with the lack of spare cash and poor exchange rate; many will be not be holidaying abroad next year.”
At Jewish Care’s Employment Resource Centre, in Finchley, North London, the picture is no less grim. Alan Sanders, a consultant and member of the Jewish Care executive, reported that the number of unemployed Jewish people seeking assistance had increased by over 50% since the previous year. “It’s been right across the board from recent graduates to experienced professionals.”
Nevertheless, Paul Edlin, the vice president of the Board of Deputies of British Jews, was slightly more upbeat. “The British Jewish community has not really been affected by the financial crisis, although some retired individuals or couples have had their savings threatened. However, matters looks like they will become worse in the next three months. No one knows where this is heading.”
Indeed, a few days ago, British Jewish leaders warned that the worsening economy could lead to a rise in antisemitism and increased support for the extreme right wing organisation, the British National Party. Henry Grunwald, Chairman of the Jewish Leadership Council said: "We're already seeing and hearing things about who is responsible for the economic downturn and we know from history that when there are economic problems, there has always been an increase in antisemitism."
It would appear that, in the United Kingdom, worrying times are here to stay, as we venture into the unknown.