When a con man is caught, his victims are often too embarrassed to press charges. I’m not. But the Madoff case is so big, with so many losers, I may be far back in a very long line. Take a number.
Bernard Madoff, former chairman of NASDAQ and renown money manager whose astoundingly consistent returns over many years seemed too good to be true, confessed to a $50 billion Ponzi scheme this week.
I left investment banking in 1994, canceled my subscription to the The Wall Street Journal, and put my assets in the hands of others. This, the worst year for many investors since 1929—and a disaster for me before I ever heard Madoff’s name—just got worser. The firm I had entrusted with my 401k had selected Bernard L. Madoff Investment Securities LLC as one of my investments.
The facts are still unclear, but it appears that Madoff’s fraud could not have been done alone. It was too big, too complicated, and went on too long for one very senior executive to manage. It is inconceivable that he could have sat in his office late at night, manipulating computer records by himself. Was he in cahoots with his auditors (a three-man operation in Monsey, NY)? With his employees (Madoff’s comptroller works from Bermuda)? With relatives (it’s a family-run business)? How could his traders not know whether they were ahead or behind? There must be accomplices.
And I wonder about regulators. There were, some say, red flags. I suspect the oversight was lax or non-existent.
In 2008, Greenspan admitted there were “flaws” in his theory and execution; Freddie and Fannie ran amok and aground; Wall Street collapsed while free markets and the “invisible hand” worked their “even-handed” magic. Where were the watchdogs? Madoff’s malfeasance victimized a lot of big boys. Will the Reaganolators among Madoff’s victims (and I assume there are many), now look at their dashboard statuette of St. Ronnie with less fawning awe and drooling reverence?
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This post, in a slightly edited form, was published as a letter to the editor in The Press Democrat (Santa Rosa, CA) on 12/18/08.