Bernie Madoff’s Gullible Investors and Guileless Regulators
After all that transpired in 2008, investors still talk about risk-free investments. Isn’t that just a tad retro?
Joyce Greenberg, a retired financial adviser in Houston, tells Bloomberg.com that she never questioned the steady returns Bernie Madoff produced over twenty years because at least in the early years his strategy was “riskless.” The returns funded college tuition and helped build nest eggs for Greenberg’s extended family, which invested heavily with Madoff and lost millions.
Actually, make that 100s of millions. Her step-mother’s first cousin was a charter member of the Madoff Investment Club in the 1960s. His name? Carl Shapiro, former owner of Kay Windsor clothing business and a Madoff mentor. The Wall Street Journal reports that Shapiro had handed over $250 million just before Madoff ‘fessed up. That’s apparently gone down the rabbit hole of risk-free investing as well.
Greenberg says she herself had maintained confidence in Madoff because he used a straight-forward strategy known as “convertible arbitrage.” It was simple — buy a basket of convertible bonds and short the underlying securities. “It’s a riskless, a riskless technique,” Greenberg says without a hint of irony.
Can a professional investor ever really refer to any investment as riskless? The word does not even appear in the Microsoft Word dictionary — nor for that matter does subprime. Both, of course, were essential terms for the purveyors of Wall Street investment concoctions: “We’ve sliced and diced the risk away!”
Risk can be a matter of perspective: Treasury securities are commonly referred to as “safe havens” or as virtually risk-free — also misleading given how rapidly the Treasury and Federal Reserve are pumping out greenback govvies. The risk of inflation in the next few years could make Treasury investments seem … imprudent. I digress.
Getting to your closer … I think Obama talks and talks, just like any con. Better than Madoff. Never give a con a second of your ear, and in this case — your essay — to use Scottish “ne’r gae a con a ha’penny”, and certainly no credit in ink and pixels.
Madoff still free, where is the money, where are the financial enablers? ie brokers
Obama talking about taking responsibility, 1 trillion dollars, just chump change.
Americans will admit to an error in judgement, this makes us stronger and smarter. However the regulators and politicians never seem to admit their errors. When everyone is loosing the financial institutions and politicians are always winning. ponzi or no.
“Riskless”… “riskless”…
Where have I heard that term used before…?
Oh yes, now I remember, it was when Franklin Raines was bilking American taxpayers out of billions of dollars while buying votes for Democrats, who ran interference for him.
@gordo: We the People keep re-electing these scum. Why should they consider themselves accountable or take responsibility for anything?
Bernie Madoff knew one thing well and that was PT Barnum’s maxim. Yep, there’s a sucker born every minute. I bet he never serves any jail time.
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Becoming John Galt
The good news in the interview is that Wall Street investors may now understand that there are three important “R”s to mind: Risk, Regulation, Responsibility. For many years, investors bought into “riskless” investing and the efficacy of self-regulation (who needs oversight — clearly these guys wouldn’t put themselves out of business?!). It seems investors are replacing “riskless” in their personal lexicons with a much more important word: Responsibility. It’s nice to know it’s making a comeback.
Ouch, not quite :
In fact, Madoff used Jewish charities to build up immunity from snoopers. Anyone suspected of being anti-Madoff was leaned on—heavily. There were many who steered clear of Madoff nonetheless. In 2003, the French Société Générale figured that Madoff’s numbers didn’t add up and placed him on its blacklist.
The trouble is that the U.S. government will not go all the way while prosecuting Madoff. Uncle Sam would if there were pension funds involved, but going to bat for some rich white Europeans is not Sam’s habit. Obviously Madoff has hidden assets, perhaps in the billions, and most of his feeder fund managers have money, too. I don’t see any of them wearing striped pyjamas any time soon. Smart lawyers, the best money can buy, will defend them against underpaid government mouthpieces. The leading players so far have maintained a stony silence, making sure to avoid any kind of apology or statement of responsibility
http://www.takimag.com/blogs/article/madoffs_make_away
and bizarre business ????
Almost forgotten in the Madoff scandal is another scandal in which Morris “Moshe” Talansky, a New York businessman, admitted that he gave Olmert $150,000 in cash contained in envelopes.
http://onlinejournal.com/artman/publish/article_4234.shtml
So, who is afraid of Mad Wolf ????
We are a nation of men not of laws.
Madoff and Buffet started out around the same time under the same set of rules and same economic sea. Madoff stole all his clients money and Buffet made his clients millionaires.
More laws will not fix this. A complete rewrite is necessary and also people need to heed the old maxim: Buyer beware.
It’s amazing how 0bama’s words mean so many different things to so many different people. A bit Nostradamus like. Or maybe more like the Koran.
Ms. Miller, it was a great piece until you jumped head first into that tar pit. Faithless people like me will never know the head buzz of Teh One. All I can do is wonder what it’s like.
It’s easy to blame the regulaters and hard to take personal responsibility.
Ms. Miller, since you proclaim yourself to be a wordsmith, the phrase is “one and the same” (no hyphens), not “one-in-the-same”. I wouldn’t say anything, normally, but I agree with #7. Don’t start quoting Obama’s rhetoric. It’s just rhetoric. It never means anything.
The Wall Street Journal is really amazing! Didn’t know anyone was ever on to Madoff.
Has fraud become easier to pull off, in this age of modern media? Or has fraud always been with us, in keeping with the tools of the times?
Thanks for the warning about financial advisers. She obviously didn’t do due diligence.
Not to worry—I’m sure there are plenty of Bernie Madoffs waiting in the wings–with new “complex” schemes!