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December 12, 2008

Ponzi Street

This is what 30 years of Deregulate-Deregulate-Deregulate-Get-the-Government-Out-of-My-Life has gotten us.  Actual e-mail from a close friend; names removed:

Hi _____--
I'm wondering if you could do me a huge favor-- I just heard on the
news that Bernard L. Maddoff was indicted in a huge investor fraud
scheme. I've had limited success in getting details on the net.
Unfortunately, my parents have ALL their money invested there. Would you
be able to scope out some details for me? I'm wondering if they will
have any chance of recovering anything...
Anyway, I'd truly appreciate it if you could find out anything (& of
course, I'd owe you big time.)
I'm totally freaking out!

In case you're wondering what this person is talking about, here's the story.  Someone oughtta punch this guy in the face, and then take all his money to redistribute to the people he's screwing.  But instead, we'll just fiddle while the country burns, taking years to try and convict him, before sending him off to some cushy country-club prison, while people like the person who wrote that plaintive e-mail just fade away.  Thank you, rightwing Republicans, Free-Marketeers, and every other arrogant, sneering, capitalism-is-an-unalloyed-good cheerleader out there. 

Comments

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It's a classic Ponzi scheme. I don't think it will take long to convict him. Hell, the guy is going to simply plead guilty is my guess. The problem is that there is very little money there -- probably a couple of hundred million versus losses of $50 billion. The investors are screwed.

I suspect he will spend the rest of his life in prision (he's 70) -- but that isn't going to make anyone whole.

i'm all for the punch in the face, taking his money, and convicting him. i feel compelled to say that there are no country club prisons. the federal minimum security prisons are relatively nice as prisons go, but you don't really want to be there. the essence of prison is the seveer restriction on freedom; even a "nice" prison, would drive most of us nuts quite quickly.

and i feel compelled to say that, while, if maddoff can aford high price lawyers, it may take some time to convict him, perhaps too long, the reality is very different in the more typical case. the more typical case is resolved with undue haste, with little time allotted the defense lawyers to investigate or prepare.

and finally, and most controversially, i would say this: all, who had any money to invest and sought out high short-term returns, are to blame. when something seems too good to be true, it usually is. curmudgeon that i am, i have been saying since the early 1990s that these returns people sought or felt entitled to--10, 15, 20 a year---are unnatural, unsustainable. a house is a place to live, i, being very much a product of the middle 20th century, said. i'm sorry that i was right, but i am not surprised. if we are going to fix this, we have not only to rein in the greed-is-good titans, we have to rein in ourselves. we have to realize that lower prices often mean someone else's job; that higher share prices usually mean someone else's job. that our $200 coast-to-coast flight that we feel entitled to means job cuts and safety compromises. we were coopted. we need to make sure we aren't again. it's not enough to blame it all on others. we did less damage than they did, but we did damage.

Well, I'm one of those (apparently rare) people who admits she's a financial naif, who doesn't live beyond her means, who believes a house is a place you live in, not a place you buy so that you can flip it or later "buy up", who paid off her mortgage enirely years ago, who has no debt of any kind, who socks away savings every paycheck no matter what, and who has always believed that the stock market is one big casino. And I don't like to gamble. So I've been laughed at for years for not putting my money there.

That said, I do have retirement money, generously matched by my employer, invested in a mutual fund, in the most conservative way possible; but that still means some of it is in the stock market because that's the way mutual funds do things. I also contribute to charities. I don't read the tiny print in the hundreds of pages TIAA-CREF sends me every year, I don't read the annual reports of the charities to which I contribute every year, and I don't know where they're putting every penny of what I contribute. I have to trust that somebody who's supposedly a professional at doing this stuff knows something about what they're doing, just as I know something about what I'm doing professionally, which is a business other than finanacial wizardry.

And if I discovered (maybe will discover?) that some of the charities to which I've been giving money have been partially invested with this huckster Madoff, then yes, I'll be angry, and no, I won't take the blame for it.

I, too, have been saying for years that a country that lives beyond its means is made up of individual people who live beyond their means. But there are degrees. In everything. And the degree to which this son of a bitch has swindled millions of people is out of proportion to their individual guilt or irresponsibility or naivete.

And yes, I know all about prisons (having briefly worked in one many years ago). I understand what the lack of freedom implies. And yes, the prison system in this country is unjust and brutal and grotesque. And a country-club prison still ain't the pen. But this is a whole 'nother subject.

Re this conversation:

Be Smart, but Don’t Think That You’re Special
By RON LIEBER and TARA SIEGEL BERNARD
Published: December 12, 2008

http://www.nytimes.com/2008/12/13/business/yourmoney/13money.html?8dpc=&pagewanted=all

Unfortunately, a "punch in the face" is the only satisfaction your or your friend is likely to get. (And for which you/he/she will likely serve time at a harsher place than Madoff will likely go.)

From what I've been able to glean from the reports, no redistribution is possible. That hypothetical/chimerical $50 billion is simply "gone."

But he's very sorry.

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