December 13, 2008

Madoff made off with $50 billion.

"Billion" -- it still means something, doesn't it? One man schemed, Ponzi-style, all the way to $50 billion. How is that possible?
Investors may have been duped because [Bernard L.] Madoff sent detailed brokerage statements to investors whose money he managed, sometimes reporting hundreds of individual stock trades per month. Investors who asked for their money back could have it returned within days. And while typical Ponzi schemes promise very high returns, Mr. Madoff’s promised returns were relatively realistic — about 10 percent a year — though they were unrealistically steady.
People know that if it's too good to be true, it isn't. So, I guess, it wasn't too good, just good enough.

IN THE COMMENT: The Drill SGT says my title is misleading, since Madoff didn't get the money for himself. I was madly trying for a play on the name Madoff. But I doff ma toque to the Sgt. He's right.


George M. Spencer said...

It is somehow fitting that the chairman of GMAC, GM's finance arm, J. Ezra Merkin was one of his customers.

J. Ezra Merkin.


EnigmatiCore said...

Partly by taking advantage of the owners of the New York Mets (I believe to the tune of $500M).

Pro athletes have been robbing the Mets blind for years, so he probably got the idea from them.

The Drill SGT said...

I think your title is misleading.

He scammed investors out of 50 Billion. yes

he plowed most of that back into fake profits for other investors. That is the essence of a Ponzi scheme

He didn't cash out personally for 50 B

David said...

Some very rich people--and some just rich--are going to be wiped out financially by this scam. It will give us a little insight into the reaction we would see from millions more of the rich (there are millions in this country now) if we enter a real depression.

In that event, the S&P average could lose half its value or more from where it is now. Nearly all leveraged investments would become worthless, and the unleveraged assets would be hugely diminished. Investment in new enterprise would remain tepid for a decade or more, hundreds of thousands of small businesses would fail and unemployment would reach 15% or greater. Charitable giving and educational endowments would shrink massively. Government entitlements would become impossible to fund now, rather than 30 years from now, as is presently the case.

Do not think it can't happen here. It can. We are very vulnerable, more than those who are responsible for preventing such things are letting on.

rcocean said...

Good comment Sgt. I wonder how much he actually lost in bad investments and how much was simply taking from Peter to Pay Paul. And how much of the loss is principal as opposed to the make believe profits he was reporting.

Odd that the NYT mentioned "Jewish Families" had lost money.

Paddy O said...

"He's right."

You overworked it.

Would have kept the wordplay and kept it accurate with "Madoff with $50 billion". Would then have to trust your readers to get what you are doing.

rhhardin said...

I can get you in on the ground floor of a 1988 Dodge Colt.

Elliott A said...

non discriminatory hoser. Greedy people lose sight of risk and focus on how much money they can make. That is why everything in our economy is unraveling, the entire economy was one giant Ponzi scheme. The dot com bubble bursting was a warning that nobody heeded. Now we pay the price

William said...

If you lose money in real estate, especially in the value of your home, people generally commiserate with you. If you lose money in the stock market, people so enjoy it. The very wish to make money in the stock market is considered an act of greed worthy of punishment.

Cedarford said...

Biggest Wall Street ripoff of investors ever. Yet Madoff and family will collectively serve less jail time than some dumb thug robbing a 7/11 of 500+ bucks - guaranteed.
(I like the Chinese..they shoot their biggest swindlers after a short trial and sell body parts)

Just make sure you pull their American and possibly Israeli passports so they can't flee and get a Marc Rich -style pardon later...

In this case, it appears that the swindler and accomplices predated on not the general public, but mostly very wealthy fellow Jews.

NYTimes: He was thought of as a great philanthropist, a pillar of the community, the chairman of Nasdaq — all of that stuff,” said one hedge fund executive who knew him.

“There was a joke around that Bernie was actually the Jewish T-bill,” the executive went on, referring to the ultrasecure investment of treasury bills. “He was that safe.”

He had come to move easily in the clubby Jewish world that iterates between New York City and its suburbs and southern satellites like Palm Beach.

Indeed, in the world of Jewish New York, where Mr. Madoff, 70, was raised and found success, he is largely still considered as a macher: a big-hearted big shot for whom philanthropy and family always intertwined with — and were equally as important as — finance.

That's the crowd he cultivated as investors..Jews rarely worth less than 50 million, and Jewish philanthropy where some foundations apparantly poured all their money into the "Jewish T-Bill". Some Jewish mogul families may have taken hits of a billion or more. Some hedge funds limited to rich Jews as clients may be wiped out. Several charities are. Yeshiva University is "examining" what this did to their endowment....

Quite a mess, but this time the swindle was inside and not so much mom&pop investors on Main Street.

(Unless mid-town Manhattan, the Hamptons, West Palm Beach, and NYC Metro's richest country club members are considered Main Street).

Madoff may just change more than any criminal how Jewish Elites on the East Coast feel about the death penalty. Especially the later-in investors who lost everything without getting the fake ROI (return on investment) profits.

He bilked very sophisticated, wealthy money people and Hedge fund guys in a Ponzi! Another blow against the lovers of "Unfettered, Unregulated Free Markets!". And their smug retort that small investors who get bilked by the Boeskys, Grubmans, Fastows "should learn to be more sophisticated and knowledgable about money and the market". Nope, the scam artists - until we start shooting them when caught - have a pretty free hand to thieve from investors from the little guy right up to the multibillionaire investment & business wizards..

Anonymous said...

"While Mr. Madoff’s firm was not a hedge fund, the scope of the fraud is likely to increase pressure on hedge funds to accept greater regulation and transparency and protect their investors...

Mr. Madoff was not running an actual hedge fund, but instead managing accounts for investors inside his own securities firm. The difference, though seemingly minor, is crucial. Hedge funds typically hold their portfolios at banks and brokerage firms like JPMorgan Chase and Goldman Sachs. Outside auditors can check with those banks and brokerage firms to make sure the funds exist."

<faceplant>You can't make this crap up.</faceplant>

CharlesWT said...

To keep a Ponzi scheme going indefinitely, you need to be able to coerce new investors into it. Even then its long term survival is problematical. Social Security comes to mind.

Anonymous said...

"Nope, the scam artists - until we start shooting them when caught - have a pretty free hand to thieve from investors from the little guy right up to the multibillionaire investment & business wizards.."

Cedarford's made a good point. If we don't shoot the perps when caught and establish a measure of deterrence, then we must regulate the crap out of everything to limit their predations.

Increased regulation and endless litigation are becoming far too expensive for a nation whose resources are devoted to bailouts; while lead and copper remain relatively cheap.

Chinese rules, anyone?

Anonymous said...

Oy. Vot a manzeyrim.

Unknown said...

Wake up people, how could one person pull this off, he didn't. He lost a lot of his people's money during the stock market sell off. Mmmm, how do we get the money back. Claim ponzi scheme with a 70 year old guy taking the blame, sue everyone, recover losses from sell off. Wonderful. Who will pick up the tab for this, we do, yeah.