Posted on 12/18/2008 11:40:24 AM PST by ari-freedom
Few Wall Street gurus or members of the financial press, if asked on December 11, would have said that the news of Senate Republicans spurning Bush and killing the automotive bailout would not be the next day's top headline. They would have been sadly mistaken.
News broke on December 12 that Bernard Madoff, former chairman of the NASDAQ stock market, was arrested for committing fraud. This was not in the form of some minor chicanery, but a fifty-billion-dollar scam. Lest the reader think that the word scam is too harsh, I will put it in Madoff's own words; he referred to his operation as "all just one big lie" and "basically, a giant Ponzi scheme."
For those unfamiliar with the nature of a Ponzi scheme, it relies on funds from new investors to pay falsified, and abnormally high, returns to existing investors. As Madoff demonstrated, as long as there is sufficient money coming in, it can reach massive proportions and continue for years.
(Excerpt) Read more at mises.org ...
Fire Chris Cox!!!!
fire the entire SEC and replace it with nothing. People shouldn’t expect the govt to figure out their financial problems when it can’t even figure out its own (social security, medicare, etc)
You cannot fire anyone that hasn’t been doing anything to begin with. It’s sort of like kicking the mentally incompetent.
Why is anybody surprised, remember who was the first head of the SEC?
One of the biggest Wall Street pirates...Joseph P. Kennedy!
From the tumult of politics emerged an elegant solution: the creation, under the auspices of the 1934 Securities and Exchange Act, of the Securities and Exchange Commission (SEC). And while some pushed for the appointment of progressive reformers to the Commission, FDR confounded partisans by appointing Joseph P. Kennedy one of the SEC’s first five Commissioners and insisting that the group designate Kennedy as Chairman. Kennedy had profited handsomely from financial manipulation
http://www.sechistorical.org/museum/galleries/kennedy/index.php
you pick this guy, you pick that guy. Still won’t change the fact that the SEC is a bureaucracy. Bureaucracies with a Republican in charge are still bureaucracies.
Most of his investors figured Madoff was doing something illegal---frontrunning---that's why they were getting big returns (16% even in down markets). These "smart, rich" types were never bothered about Madoff's sub rosa activities.
As the bard of Avon wrote: “tis better to be thought a hapless victim of a Ponzi scheme than to admit to tax evasion.”
EXCERPT Madoff was single-handedly managing billions of dollars in offices he kept separate from the rest of his firm........The only oversight was conducted in a Rockland County accounting office only slightly larger than a cubicle. The firm's main office was in NYC.
Madoff made his fortune embracing the latest and best technology, BUT he forbade investors to get online access to their accounts, insisting instead on paper printouts....
For well over a decade, competitors and experts said they found Madoff's track record suspicious. He seemed immune to any volatility in the market and, no matter what was happening in the economy at large, managed to finish each month with almost identical profits. Madoff dismissed attacks as "envy" and said critics simply did not "understand" the complexities of his strategies.
Aksia LLC was hired to investigate Madoff several years ago, said principal Jake Walthour. The probe only increased the concerns about the fund. Madoff's returns were "abnormally smooth" from month to month, and it seemed impossible to replicate his investment strategy or verify his track record.
Madoff claimed to be moving as much as $13 billion in and out of the market every month, but "no one on the street could verify it or even see his footprints," Walthour said. "That organization was incredibly secretive." When they staked out the tiny accounting firm no one had ever heard of, investigators concluded something was amiss. "We decided there are several scenarios here, one of which is, this could be a Ponzi scheme," Walthour said.
Those who have invested in the fund have told investigators that withdrawing cash from it was an arduous process that involved faxes and inexplicable delays.
SOURCE Bloomberg and NY Post wire reports
http://www.nypost.com/seven/12132008/news/regionalnews/alarm_bells_in_1999_ignored_143971.htm
CONCLUSIONS If they were stupid enough to give Madoff $100-500 million, that’s too damn bad. I do not believe the so-called "investors" sob stories for a nanosecond.
Impossible to believe astute businessman who made fortunes in competitive businesses would allow themselves to be scammed.....unless......these privileged elites were in collusion with Madoff to engage in a massive tax evasion scheme. Tax evasion would explain why savvy, astute businessmen were giving this guy huge sums ---$100-500 million--- to “invest.” Apparently Madoff kept a cut of the “investment” and wire-transferred the bulk offshore to friendly money laundering havens. The whole scam crashed b/c Madoff probably wanted a bigger cut but the "investors" refused.
well McCain certainly couldn’t make the case as he was bashing the free market and ‘greed’ every other day until he met Joe the Plumber. Then he continued to bash the free market.
What kind of "free-market institution" is he talking about? Perhaps the ratings agencies (Moody's, Standard & Poor's) that were assigning AAA ratings to collateralized debt obligations for $500,000 mortgages given to illegal aliens with a family income of $38,000 per year?
Read the article.
He mentions Aksia in specific.
Those responsible for oversight who failed should be jailed.
Mr Madoff ran his scam through a spinoff----separate from his main firm called Bernard L. Madoff Investment Securities. The much larger main company operated broker-dealer accounts - trading securities for investors - while the spinoff was a hedge fund.
Madoff was single-handedly managing billions of dollars in offices he kept separate from the rest of his firm........The only oversight was conducted in am upstate Rockland County accounting office only slightly larger than a cubicle (the firm's main office was in NYC). Friehling & Horowitz is a three-person accounting operation based in the northern suburbs of New York City. It is run by one partner, David Friehling, who is in his seventies and is understood to live in Florida, and employs an accountant and a secretary. David Friehling is now under investigation.
FEDS DISCOVER YET ANOTHER MADOFF SIDELINE After he was nailed, federal investigators found evidence Madoff ran an unregistered money-management business alongside his firm's brokerage and the investment-advisory subsidiaries. Clients of Madoff's sideline may have included hedge funds.
Moody’s was correct. Every single bought security is and will be made good by the US Government, on the backs of the taxpayer and future generations.
That why, and is why those mortgages that went through Frannie and Freddie are trip A.
It doesn’t matter whether the homeowner pays them off. The US government backed them.
............
About Madoff. Many, we will never know how many, maybe hundreds did not invest with him when they did due diligence. Those people are free market actors.
Further, I think this Madoff will expand. I think his family, his brother Peter who founded the company with him, are in on this.
I think there were bribes, of a type for other actors that brought money to him.
Also, did you know his brother, Peter, his daughter married a guy in the SEC?
To me, the bigger story here has nothing to do with SEC oversight -- or lack thereof.
In my opinion, the bigger story is the strong probability that many of these investors knew damn well that the whole thing was a fraudulent scheme, but they never reported it because they thought it was a DIFFERENT kind of fraudulent scheme (i.e., one that would pay off well for THEM).
In the last few days I've seen several stories where unnamed investors in this "hedge fund" thought Madoff had been providing consistently high returns by engaging in an illegal trading practice known as front running.
If this is the case, then 'eff them all.
That's kind of silly. Those were not AAA-rated securities when Moody's rated them . . . they became AAA-rated (whatever that may mean in the long run) only after the whole house of cards collapsed and the U.S. government decided to prop these bonds up.
BTW, Michael Milken made a killing trading junk bonds in the 1980s by accurately predicting (often based on insider information) changes in bond performance related to this kind of thing. He'd buy bonds cheaply when nobody wanted them, then sell them when some turn of events drove the company that floated them to start performing like a AAA-rated company.
I agree with your sentiment about the size of this Madoff affair. There's no way in hell one guy carried out this whole thing, though I suspect it will turn out to be a lot simpler than anyone thought possible -- mainly because he had so many clients who were so willing to be duped.
On a half-serious note, I'd point out that the Mafia would probably provide the most effective "free market" regulatory oversight of this kind of scheme!
The only difference between the capricious and arbitrary government, and the Mafia, is that the Mafia wants you to make more money, whereas the government gets theirs every two weeks, no matter what.
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