Reading the astonishing tale of Bernard Madoff and his giant Wall Street ponzi scheme just unearthed in the last couple of days, it suddenly occurred to me that people like Madoff reacted to money the way others did to heroin. They could never get enough of it. They were totally dependent on it. And it clouded all other judgement — practical and moral.
I’m assuming that Madoff was and is a tortured man, but it is difficult to imagine how anyone could live with himself for the amount of time he did, knowing he had betrayed so many friends and colleagues, even, evidently, his own children. Drug addicts behave that way, of course. We all know that. Perhaps we need a new category of mental illness for the money addict. This is not to excuse Madoff. He deserves to go away for life and I imagine he will. But a diagnosis of this nature can help spot the money addicts of the future. They are dangerous, perhaps fatal, to our health.
As an Italian, I am relieved that the term Ponzi Scheme can now be retired. Henceforth, use “Madoff Scheme”.
Maybe he was just a money grubbing prick and criminal who just was able to get away with it as long as he could until he couldn’t any more. No psycho analysis needed.
How about Ponzi/Madoff Scheme since they both wanted the wealth they should share the title and live in shame forever. We may be informed down the line of others that have been pulling this off, some very famous and some not so famous. What a great mystery tale this would make and just imagine
what a hollywood movie will come out of it, It always comes down to money and the greed for it.
Madoff should be incarcerated in a regular prison not a federal one.
“….help spot the money addicts of the future.”
That is easy. Who is running for political office? You don’t necessarily have to be from Chicago, but it helps.
People want to make Blago a mental case. But really, this guy is mental.
Imagine doing a high wire act (no net) with billions of $$ where you are the only one to know what is going on. You have to keep track of this elaborate deception, having to be compulsively meticulous in your record keeping. Never a word to anyone, always keeping a mask over your face. Hard to do it you’re “normal”
Just goes to show you that not all the crooks are politicians.
I’ve read some comments from people who are glad to see a large number of wealthy people get hurt, but what I see instead is a real lost opportunity.
Just think, if this money had been invested in genuine growth projects, like starting viable new businesses, it might have generated a lot of new jobs and improved the lives of many. The monetary returns wouldn’t have been as good or as quick, but the long-term benefits would have been many.
Instead, a bunch of lazy, greedy thieves, headed up by a crafty, lazy master-thief, sought to get richer quicker without any effort at all, and now everyone loses.
You can’t cheat an honest man, but thanks to a bunch of dishonest people, a great many people are cheated out of an opportunity.
Scott
What on Earth is Scott talking about?
Instead, a bunch of lazy, greedy thieves, headed up by a crafty, lazy master-thief, sought to get richer quicker without any effort at all, and now everyone loses.
Many of the investors with Madoff about whom I have read are people who earned their money through years of hard work, creativity, diligence and patience. At some point in your life, it is rational to take what you have amassed and invest it in other companies and financial instruments.
Most of these people thought that they were giving their assets to someone who invested conservatively and moderately. They had no idea that the guy in charge was an amoral thief.
One of my friend’s family has lost most of what her parents spent decades earning.
The only dishonesty and cheating going on was Madoff. Many of the investors are simply people, whether immensely wealthy or not, who have been scammed out of a lifetime of work.
My understanding is that there was a rather large rate of return on this guys investment. Isn’t that suppose to be some kind of caution like to these investments.
I remember about 30 odd years ago my mother bragging about the 18 pct she was getting back on some kind of investment. I told her nobody pays that kind of money. I was right. She never got paid and lost her initial investment.
The odd thing is that everyone–I mean everyone–knows that a ponzi scheme will always be found out, always. What was this guy thinking? Yeah, he must be mentally ill.
This guy’s basic problem is that he ran his Ponzi scheme on his own.
If he’d been in Congress he could have gotten rich (especially illegally, provided he was a Democrat) running a Ponzi scheme (See: Social Security) and no one would have uttered a peep about it.
Barbara is correct …the Dems would not know a Ponzi scheme even if it brought down Social Security, the mortgage market, the Big Three and the Auto Workers all at the same time.
I think Barney Frank called it welfare …”I am in favor of welfare, aren’t you?”
What on Earth is Scott talking about?
I’m talking about people who buy into Ponzi schemes as a shortcut. The don’t know where the money gets “invested” and they don’t care–only that they are promised returns that are impossible (or highly unlikely) through legitimate means.
Why else would any of these supposed hard-working people have given Madoff a dime only to get the same returns they could get elsewhere? All Ponzi schemes operate on the notion that the returns will exceed other forms of investment.
That’s how the investors’ greed causes them to end up being cheated. In this case, a lot of money went down the drain, money that might have been invested in something genuinely productive.
Scott
13. srlucado: Stop talking out of your ass. You have no clue about what your spouting. The people who invested with the guy are for the most part entrepreneurs who invested their hard earned money with a guy who had apparently been successful for nearly 40 years. Many of these people are self-made and are involved in their business full time. They are not sitting at home watching the tick by tick of stock market transactions. They are running their businesses instead and employing people. No one can run a Ponzi scheme for nearly 40 years. These things last at most 2 years before they blow up. Madoff must have been earning real returns for years before he started losing, probably about a year and half ago and like a gambler started making bigger bets to cover his losses.
The investors would get monthly statement with the transactions listed and the buy/sell confirms. He bought X shares in company A for a buck and sold the shares for a $1.15. Take the cash and buy stock B and the sell and so on. He would take some losses here and there among the gains as well. Why would the investor suspect a fraud? They could compare the purchase price with the prices reported on the day of the purchase as well as the sell prices. It would look legit. Most investors would simply leave the money in the account none the wiser. A rollover, like a CD. They would take an occasional redemption for taxes or other reasons, get paid, so why suspect a fraud? It is only in this horrific market when people started pulling their money out, not due to fear of Madoff himself but a generalized fear, is when the scam unraveled when he could no longer pay out redemptions. To add insult to injury, all of the victims paid taxes of the fictitious profit. Only the government really profited off this guy along with the dumb lucky investors who were able to cash out. And those people may be forced to giveback the money to the trustee/receiver when the firm is liquidated in a bankruptcy procedure.
It is amazing to read the self-righteousness of people who comment without the slightest knowledge of what they are talking about but so certain of the correctness of their views.
Lots of ego here as well. Crooks depend on it. That guy who invested his money with Mr Madoff had higher returns than his neighbor.I had a co-worker who used to brag about the real estate deal he bought into. “Closed now, sorry you can’t get in, but I’m making a fortune.” You can guess what happened.
Once again, when a democrat supporter is caught in a criminal act, and this is a crime what this man did, I wonder if there is ever anything turning out right. This man shuffled lots of money to Schumer, Dodd, Lautenberg, of course Rangel, and Frank.
Democrats are almost criminals, and averything they support or do, goes up in flames (Fannie Mae, Lehman Bros etc).
Since complaints surfaced in 1999, where was our friend Spitzer? where were the rest of the dems, who cashed in?
Ar those rich people, who invested in the cheating game (and they surely thought of making a buck by cheating)are also asking for a bailout now?
I think it’s time, that all politicians who have in the past, and currently are taking contirbutions in failed adventures whehter it’s banks, unions etc need to 1)return the money, and 2)be crinially held responsible. It’s time to clean out Washington.
Here’s anoyher WSJ story that makes my point a lot better than I can.
http://online.wsj.com/article/SB122914169719104017.html
Oh come now Roger, “Tortured?” I wish he would be physically tortured – given the enormity of his crimes. Roger, forget sympathy for this guy. OK? Forgetaboutit! He’s a criminal who will hopefully spend the rest of his life in jail. Stop making excuses for thieves and frauds. He’s not mentally ill, he’s a crook!
And Barbara, well put. When are Americans going to wake up? Social security is a ponzi scheme, just like this guy’s.
And as well there is a lot of “us and them” going on. You know “those people” the ones who don’t belong to the “right ” country clubs and didn’t go to the “right” schools and didn’t join the “right” fraternity or sorority and don’t have the “right” money guy. You know “them”. I mean not the right bone structure at all, you know. Since I’m one of “them” I’ll find it really hard to feel sympathy for those of “us” who got burned.
Glenn, great article. Three things of note that come to mind as I read the article that stands out.
1. “This is a real tragedy,” Mr. Madoff’s attorney, Ike Sorkin, said Friday. “We’re going to fight through these events and do what we can to minimize the loss.”
2. It’s good to be a guy who can’t afford country clubs and private beach clubs.
3. Now I feel very bad about any further complaining about my losses in my IRA.
The people who invested with the guy are for the most part entrepreneurs who invested their hard earned money with a guy who had apparently been successful for nearly 40 years.
Maybe, but that doesn’t mean they weren’t greedy (and careless) nonetheless.
Madoff is the worst sort of villain, no doubt, but he wouldn’t get nickel one without willing participants.
I’ve known a lot of people – people who should know better – who’ve gotten burned in any number of different ways (penny stocks, oil drilling, biotech startups, ostrich farms, foreign exchange futures, house-flipping, baseball cards, you name it), but none of that money was lost because they’d done their homework on where their “investment” was actually going, how it was actually going to come back, what could potentially go wrong, and how likely it was that it was all too good to be true.
It was only when these people got dollar signs in their eyes and their judgment got clouded that they ended up getting clobbered. They weren’t investing, they were gambling.
Your point is that this Madoff business is somehow different, and I simply doubt that.
After all, how much money did Warren Buffett “invest” with Madoff?
Scott
Get rich quick schemes are in the face of all of us on a daily basis, “no money down houses”, “houses for sale for a few hundred dollars” etc. people keep
falling for these schemes like # 20 states, no real investigation into the pitfalls. Television is a mass market for these crooks and no one even discusses
or investigates them. Everyone wants to be a “TRUMP ” and a “Buffett”, but they have done their homework and if not have hired people to investigate the
long term possibilites in investing, A good broker in the stock market will do the investigating and tell their client’s what the short and long terms are
when investing, but we must all take responsibilty for some research in any form of financial involvement of our funds. “Trust” is a very meaningful word
in our lives and one must check every avenue when commiting that trust, otherwise, blame only ourselves for the consequences that befall us when it
fails.
Have a good Sunday.
“Whoever loves money never has enough of it; whoever loves wealth is never satisfied with his income.” Some philosopher wag from the time of King Solomon, 3,000 years ago.
“For the love of money is the root of all evil” Some Jewish preacher, teaching a Greek young man, 1,950 years ago.
Madoff loved money more than anything else. In the process, he lied to many people – people who trusted him, even for decades, with their investment money.
$50 billion is not chump change. It’s the GNP of a few small countries. And all of it is gone. Don’t be surprised to hear of a few suicides happening among a few socialites who were betrayed by this man. It’d be a sad thing to watch, but he must carry that in his conscience for the rest of his life.
And the Feds better make sure he does.
Thank you srlucado, I had completly forgotten about ostrich farms. And Llamas.
And it should also be noted that just because someone is good at making and selling widgets doesn’t mean they can’t be outsmarted by a clever crook. But it’s the greed that does them it, and the thrill of being on the inside with “us” not outside with “them” That’s how cons work.
Just my 2 cents -
My understanding is that his clients were receiving 1-2% per MONTH! That’s 13-27% per YEAR! Think about it – this is an insane return on any investment given historal rates of return! You double your money every 3-7 years? His some of his “clients”, from what I’ve read, thought he was an inside trader. But they could still cash in the money and run, with plausible deniability if he was ever out’d. His clients got greedy. They never imagined it was a Ponzi scheme. Still, insider trading or Ponzi scheme, each are corrupt, including the knowing enablers. And that includes the “clients”.
I heard on the radio this morning that many of his suckers were in fact institutional investors like pension funds etc. not just gullible private folks.
The losses mentioned were all over $100,000,000.
Heck this guy was a former head of Nasdaq why would you suspect he was a crook?
Just remembered that two of the instutions I mention above are the Royal Bank of Scotland and the largest bank in Spain.
If nothing else, Madoff was damn good at his job.
Clients making that return from Madoff aren’t necessarily ‘looking the other way’. This guy was supposedly (his ‘story’ to clients) using futures and options against an equity base in the SP500 index. It is possible to make those returns, many people have done it, and are doing it.
AlanC, Nomura too –Japan’s giant brokerage firm –in for over 300mm. If the guy could fool a huge brokerage firm, well, a little sympathy –or at least a surcease of condemnation –is called for re the retail victims. Some of these families are busted –do they need us telling them they got what’s coming for –for what –trying to make a buck? hell, who ain’t?
“Heck this guy was a former head of Nasdaq why would you suspect he was a crook?”
That was rhetorical wasn’t it?
Read “Vosey Inheritance” by Harley Granville-Baker – 1905. Adapted By David Mamet 2005
And I wonder who has the money?
glenn, a prediction, based on nothing more than the track records, timings, intents, politics, and proximities: a Soros link, sooner or later, and the dark pools of the London ICE and Dubai exchanges. That is, if the investigation doesn’t hit a donkey firewall.
Excuse me for my ignorance, but where is the money? It was passed along to the next guy, but somewhere when it caved in some real money had disappeared. Is it off shore?
I don’t know what a derivative is other than most of our troubles are the result of original sin and Democrat policies.
Trang, yes a lot of rent was collected out but when the landlord dropped by oops the house was missing.
buddy larson’ no investor,big or small,would dream of a return of 10,12% year after year in good or bad times.Dream on.