Abstract: Making Sense of Financial Crisis and Scandal: A Danish Bank Failure in the Era of Finance Capitalism

Per H. Hansen

Abstract

In this paper I discuss a serious financial collapse and scandal in Denmark in the interwar period. I analyze the failure in 1922 of Scandinavia's largest bank, the Danish Landmandsbanken, and the downfall of its CEO Emil Glückstadt. While this is a specific case that cannot be generalized, I argue that the approach and the findings are useful in analyzing and understanding other cases of financial crisis and scandal and their outcomes. Thus, the wider perspective is to contribute to an understanding of and to exemplify how societies make sense of financial crises and of the rise and fall of financial superheroes and other icons. In the early 1930s it was financiers such as Ivar Kreuger of Kreuger and Toll, Oscar Rydbeck of the Swedish Skandinaviska Banken, Jakob Goldschmidt of the German Danat Bank, and Charles Mitchell of National City Bank who realized that success does not necessarily last forever. Today, obvious choices would be Dick Fuld of Lehman Brothers, Joseph Cassano of AIG, Jeff Skilling of Enron, and, of course, Bernie Madoff. These scandals are cultural as much as economic events. They challenge conventional values and categories and force contemporaries to make sense of the dramatic fall of these icons and of their role in the collapse of their banks. In the paper I present a discussion of the sense-making process following Landmandsbanken's collapse and Glückstadt's fall from power. I argue that sense-making and narratives are of paramount importance in constraining or enabling institutional change. Whether change will be possible depends on the narrative that has come to prevail when the sense-making process has stabilized the meanings assigned to scandals and financial crises. In order for radical change to be implemented, the grand narrative has to be fundamentally challenged by the narratives that make sense of the concrete crisis and scandal. If the grand narrative is capable of assimilating or absorbing the dominant crisis narrative, fundamental change will not be possible. In the words of David Carr, "sometimes we must change the story to accommodate the events; sometimes we change the events, by acting, to accommodate the story."