NY Times, September 22, 2000 In Japan Banker's Suicide, Hints of Debt Burden's Human Toll By STEPHANIE STROM TOKYO Sept. 21 - The suicide of the new president of Nippon Credit Bank, which was saved from insolvency earlier this month by a group of investors led by the Softbank Corporation, has stunned Japan's banking industry. And it has underscored the human misery caused by the burden of bad debt that continues to vex the Japanese financial system. Tadayo Honma, a former senior official of the nation's central bank who joined the investor group in February, apparently hanged himself from a curtain rod in a hotel while on a business trip to western Japan. His body was found early Wednesday by his secretary. Nippon Credit said a managing director, Yoshinobu Kodera, would be acting president until a replacement for Mr. Honma was found. "I still can't believe what has happened," said Masaaki Kanno, a senior economist at J. P. Morgan in Tokyo, who had worked with Mr. Honma at the central bank. "We're all in shock." It is hardly unprecedented for high-ranking Japanese executives to commit suicide in the face of a scandal or when their businesses are under extreme duress, and the number of banking executives who have killed themselves has increased in the last several years as the financial industry's condition worsened. But Mr. Honma did not face quite those problems. Bank officials and friends said that they knew of no health troubles, and that Mr. Honma, while not a jolly man, was not given to depression. "He was quite popular among younger people at the bank, very open and approachable," Mr. Kanno said. Mr. Honma had spent much of the last year helping Softbank, Japan's largest Internet investment company, and its partners, the Orix Corporation and Tokio Marine and Fire Insurance, negotiate a deal to buy Nippon Credit from the Japanese government, which had nationalized the bank in 1998. The deal was completed on Sept. 1, after it had nearly collapsed when a number of big companies were asking their banks to forgive loans. As part of the deal, the government pledged to make good on any Nippon Credit loan that lost more than 20 percent of its value at the time of the sale, meaning that responsibility for loan forgiveness could be shifted to the government. Such a provision raised the prospect that public money would be used to bail out private companies. That was politically unpalatable, and senior politicians pressed bank regulators to renegotiate that provision, leading to a one-month delay in completing the sale. Ultimately, the politicians realized that they could not both alter the terms of the sale and maintain credibility, and they grudgingly allowed it to go through on Sept. 1, having rebuked banking regulators during Parliament debate in August for agreeing to such a provision. Mr. Honma was involved in that controversy, according to officials in the Softbank group. "He had been under a great deal of stress," one executive said. "The strain of dealing with the authorities over the last several months, particularly in August, was intense." For their part, the authorities suggested that tensions in the investor group may have affected Mr. Honma. There were rumors that he disagreed with Softbank on several matters, including the disposal of bad debts. "I have heard that his psychological stress was mounting because he was placed in a dilemma over the interests of the three partners," said Hideyuki Aizawa, the head of the Financial Reconstruction Commission, the agency responsible for overhauling the Japanese financial system. "I heard that the three companies requested various things." Pressure on Mr. Honma did not abate after the purchase of Nippon Credit. While the government spent 3.2 trillion yen, or nearly $30 billion - almost as much as it plans in a supplemental budget to keep the national economy afloat - to clean up Nippon Credit's books, that left about 1.2 billion yen in questionable loans, or one-third of the bank's loan portfolio. Not only did Mr. Honma have to rebuild business at a time of particularly intense competition, but he also had to continue wrestling with the bad loans. And he knew perhaps better than anyone else how bad those loans were. He was the executive director of the financial and payment systems department at the Japanese central bank in 1997, when Nippon Credit was given its first bailout. According to several former and current central bank officials, Mr. Honma worked hard to persuade several insurance companies, other banks and Nippon Credit shareholders to then recapitalize the bank. He was also one of the top officials dealing with the failure of the Yamaichi Securities Company in December 1997. Those ordeals, in a way, made his suicide more mysterious than some others. "This is a guy who lived through some of the biggest battles in the Japanese financial system," said Marshall Gittler, a currency strategist at the Bank of America and longtime specialist on the Japanese financial markets. "Was there any more pressure at Nippon Credit Bank than there was when Yamaichi went under? I find that hard to believe." Louis Proyect The Marxism mailing-list: http://www.marxmail.org
