The New York Times just published the definitive Bernie Madoff piece so far, Madoff Scheme Kept Rippling Outward, Across Borders. Reading about Madoff, I can't help but think about this conversation attributed to J. P. Morgan:
Untermyer: "Is not commercial credit based primarily upon money or property?"
Morgan: "No sir. The first thing is character."
Untermyer: "Before money or property?"
Morgan: "Before money or property or anything else. Money cannot buy it...because a man I do not trust could not get money from me on all the bonds in Christendom."
That sir, was the problem of course. And this sort of behavior:
It was one of an unknown number of deals that prominent financial figures set up in recent years and marketed to investors, who thought they were tapping into the acumen of some Wall Street titan, like Mr. Merkin.As it turned out, their money wound up in the same place -- in Bernie Madoff's hands.
These conduits began to steer billions of dollars into the Madoff operation. They operated below the financial radar until Mr. Madoff's scheme collapsed, when investors suddenly got letters from the sponsoring titan disclosing that all or most of their money was probably gone.
Ascot itself attracted $1.8 billion in investments, almost all of which was entrusted to Mr. Madoff. New York Law School put $3 million into Ascot two years ago, and has now initiated a lawsuit in federal court that accuses Mr. Merkin of abdicating his duties to the partnership.
Mortimer Zuckerman, the billionaire owner of The Daily News, rebuked Ascot in a televised interview, saying he had been misled about what Mr. Merkin had done with some $30 million from Mr. Zuckerman's charitable foundation.
Behind a wall of lawyers, Mr. Merkin did not take calls this week. In the "Dear Limited Partner" letter he sent on Dec. 11, he noted that he, too, was one of Mr. Madoff's victims and suffered big losses alongside his investors. He has taken steps to wind down his Ascot, Gabriel and Ariel funds.
Still, some of his clients are stunned, and angry, to learn what Mr. Merkin did with their millions, while collecting an annual management fee of 1.5 percent of the assets for his services.
Greedy retards.
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GREEDY ABSOLUTELY - From all involved
NO ONE WANTED TO "KNOW"
From New York to Geneva, corruption is rampant and complex on Wall Street, including the process of accumulation of this much cash..
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http://pacificgatepost.blogspot.com/2008/12/is-madoff-really-anomaly.ht…
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MADOFF IS NOT AN ANOMALY
In this case, it wasn't necessarily GREED that was the problem - tragically, many of Madoff's non-institutional investors were not looking for high returns (some other funds offering much higher if less reliable returns) but for security, and trusted the advice of experts who proclaimed Madoff to be as safe as a T-bond.
And as far as those experts and Madoff's institutional investors are concerned, it wasn't really greed, either - hard to put a finger on it, but you'd call it a combination of laziness, unprofessionalism and stupidity. I think, however, that some of the clients that invested with Madoff through banks and funds of funds might see some of their money back through the courts - any investment consultant who claimed to have done due dilligence on Madoff has been outed as an outrageous liar by the turn of events.
Greed is exactly the right word. Normal human greed. They were offered something they knew was too good to be true - high returns with low risk. They didn't want to investigate. They didn't want to know the truth.
The funny thing is many apparently thought he was doing something illegal, they just didn't know what, but they wanted in.
All scams play on the greed of the victims. This is just a $50 billion version of the speakers-in-a-van scam. The "victims" think they are beating the system. All scams rely on the greed of the victims and the victims willingness to skirt normal rules of society.
When I say greed, I don't mean it as some uniquely horrible sin. Everybody is greedy. It's a normal human urge which we have to control.
His investors didn't want "safety". They wanted safety plus guaranteed 10%+ annual returns. And they didn't want to know how it worked as long as the money kept rolling in.
here's one reason why it's greedy: many of these were very rich people. the extra madoff-money wouldn't have made much of a consumption difference. they were squeezing out perhaps $50 million more in a 10 year period than if they had diversified. if you're a person with $1,000,000 the madoff margin might make a big difference in your lifestyle, and it might be worth it to take the risk and not diversify. but for the super-rich, that's not the issue. they wanted to pad their wealth a few hundred million more than if they had diversified....
So where did all that money actually go? As Brewster's Millions portrayed, it is really tough to spend mass quantities of money on a daily basis. Beyond about $1B (or less) it just grows faster than you can spend it. Look at Paul Allen for an example. On a much smaller scale, we had a local scandal where this kid managed to embezzle about $70M over a couple of years. For a while they were doing things like showing up at kindergarten in a different new car every day. And they still did not manage to spend all of it.
Stupidity yes. Greed is not to blame. Plenty of people are greedy on return on their money and most greedy people are not ripped off.
I am glad about Madoff ripping off who he did. Talk about evolution, this is a perfect example of natural selection. And perfectly fair.
I don't even have the slightest sympathy for the foundations. These are mostly status displays by living individuals and most of the ones in the list have some of the worst outlay to expense ratio -- meaning the people who work for them are bureaucratic and lazy overhead.
I hope Madoof gates off, and barring that that the "investors" don't get a nickel back.
Stupidity yes. Greed is not to blame. Plenty of people are greedy on return on their money and most greedy people are not ripped off.
semantic quibbling. in hindsight stuffing all your $$$ into the opaque vehicle of madoff was stupid. but if they were so stupid they would have thrown their money around randomly (or listened to the rantings on CNBC); no, these were people who often had smarts & connections enough to make money in their own fields, and thought they saw a "sure thing" which others were not privy to. the big losses by hedge funds who invested in madoff can be attributed to a broad definition of stupidity, but i think that collecting investment fees for their "services", and their likely suspicion that something weird was going on (seeing as how some people in finance expressed their skepticism already), implies greed combined with awareness as opposed to blind stupidity.