The preferred explanation of many of my interlocutors, that this was somehow a result of Bush's deregulatory mania, won't do, and not just because there's not really all that much evidence of Bush's financial deregulatory mania. Tax cuts and financial regulation, however tightly coupled they may be in your mind, are neither substitutes nor complements.
Madoff's activities were not the sort of gray-area thing that might be slipped in among a newly lax attitude towards SPEs and SIVs. It's straight out old fashioned fraud, of the sort that no one, no matter how keen they are on deregulation, thought was okay. The SEC did not give a pass to Madoff because Bush, or anyone else, had told them to go easier on Ponzi schemes.
Somehow, even though everyone agreed that this was the sort of thing the SEC should be aggressively rooting out, and the SEC has perfectly adequate resources to investigate high-profile fraud at a 20-person operation, the SEC dropped the ball so hard it's probably even now still falling through the Earth's mantle towards China.
The market failed as badly as the government. The people he bilked weren't unsophisticated consumers of the sort that we assume need regulatory protection. They were extremely rich people, many of them with backgrounds in finance.
The market failed. The government failed. Leaving us with a big WTF? We cannot fix this either by new rules--the SEC hardly needs new rules to make it clearer that you shouldn't fake financial statements while paying current investors out of the funds invested by new ones. Nor by better reliance on private institutions--it's hard to argue that super rich people with considerable financial savvy were somehow blinded by some badly designed government intervention. Everyone just screwed up.
We can send Madoff to jail, and I presume we will (and I shall want to know a very good reason why if we don't). But that's not very satisfying, is it?
Copyright © 2009 by The Atlantic Monthly Group. All rights reserved.
How did Bernie Madoff get away with it?
Hmm, well my guess would be because it's become difficult to tell the difference between Ponzi schemes and government programs these days.
semm, that makes no sense.
he got away with it because there is simply no way to completely prevent smart people from pursuing "old fashioned fraud" if that is really what they have their mind set on...
P. T. Barnum could answer this question for you, Megan.
People are simply not skeptical enough in the appropriate ways and situations. Try to sell them an investment that pays 5% interest/year for 20 years, and they look at you like you are trying to rob them. Offer them an investment that claims to pay 20%/year for 20 years, and they stampede each other to give you their money. And the more they think the system is designed for their benefit, the less skeptical they become. Indulge their madness with government guarantees, and they will gamble their entire savings away without a further thought.
Megan,
That's the thing that's so striking about this case, and to a lesser extent about the financial meltdown started by the mortgage meltdown. Time and again, we see allegedly sophisticated investors, "the best and the brightest," guys with graduate degrees in finance and massive computer models and risk departments behind them, falling for fairly obvious stuff.
I mean, before the meltdown, I'd never heard of a CDO. But how the heck did anyone who understood what they were doing give the top tranche of a CDO made up entirely of bottom tranches of mortgage CDOs a top bond rating? How did anyone not see that this would melt down in any serious economic trouble?
How did the extremely sophisticated investors producing the CDOs (and often keeping the bottom tranche themselves) or buying them not realize that their historical default statistics were conditioned on both constantly-rising home prices and levels of honesty in mortgage writing that had gone seriously downhill? I'm not in finance, and I'd heard about the weird stuff being done to get people into houses--the stated-income loans with more-or-less made-up numbers, the waiving of almost all the traditional requirements for getting a mortgage, etc. How did the guys investing billions in this market not know about and account for that?
This is like being at a doctor's office, staring at the diplomas on the walls and listening to the professional dialogue, and being reassured. And then you walk around the corner, and see the doctor reading "Medical Diagnosis for Dummies" and working a Ouiji board to decide what your prescription should be.
That's a loss of confidence that will take a hell of a long time to recover from. It's leading to a lot of the push for regulation (much of it probably bad). The guys who were supposed to know what they were doing no doubt got snared to some extent by really hard-to-understand derivatives and hard-to-discover counterparty risks and such. But they also appear to have been working that Ouiji board and reading "Fiercely Complex Financial Derivatives for Dummies."
to me the consistent thread in most of these market/regulatory failures is a lack of transparency. Every major failure seems to be a toxic combination of massive leverage coupled with a mechanism whose inner workings are shielded from the outside. I am thinking primarily of CDO's and hedge funds. to me, effective regulation would deal with that.
Thoughts?
Not that simple. If you make hedge funds disclose their trading strategies, they won't be able to make money with them. Moreover, Madoff was extensively disclosing; it's just that what he was disclosing, wasn't true.
meagan, that is exactly the point, and why you appear to be answering your own question.
"SEC dropped the ball so hard it's probably even now still falling through the Earth's mantle towards China."
"Leaving us with a big WTF?"
Megan, is Ta-Nehisi rubbing off on you?
The government failed? You mean, that appointing clueless, business-friendly hacks like Chris Cox to head an agency that's supposed to be tough on business is maybe a bad idea? That maybe not giving an agency enough funding or personal might increase the number of, shall we say, bad outcomes? Sort of like what happened with FEMA, the FDA, et al? Oh, of course, rather than make empty assertions as if they were fact, let's toss in a link:
So it's disingenuous to say 'the government failed' without pointing out that the people in charge of running it had the idea it wasn't supposed to succeed.
Finally, I'll note that in fact, the SEC did catch this guy in the end, so to say that the government 'failed' without specifying exactly how it did isn't terribly honest either. I'd say that by a typical libertarian's criteria, the SEC succeeded(the sort of libertarian that is, who claims that speeding laws are an infringement on their personal freedom, and that it's enough to punish any do-badders who actually cause an accident)- Madoff engaged in fraud, and he got caught. End of story.
Again with Yancey. People need to just be smarter about how they invest. Particularly rich people.
But, as per usual, we'll have to have a sob fest for them because, well, they're rich and lost money.
As opposed to all the OTHER, regular, little people who get caught up in Ponzi schemes every day, lose their nest egg, and receive no response from society other than they should have been more watchful over their own money.
Again, from a libertarian point of view, how is this any of our concern? They got swindled, lost money and the law is taking care of it. Next.
Am I supposed to somehow feel WORSE for them because they're rich and lost money than the average person that gets swindled?
It's really quite easy. You figure out the result you want and work the numbers backwards. This is exactly what I did to get the mortgage on my house (a fully documented 10% down, 30 year fixed.) I looked at what "result" the lender wanted and then worked the numbers backwards. No fraud, but not what I would call the objective financial truth either.
Nobody checks. I don't check cause I want the house. The bank doesn't check cause they want to sell the loan. The people who buy the loan don't check because we've all conspired to create a "conforming loan" that can trade as a commodity on the secondary market. Nobody checks because we're all getting what we want.
Until we're not.
I remember that "A Random Walk Down Wall Street" by Burton Malkiel was the textbook in my finance course at university, and he presented in that book a lot of research that the professional investors weren't particularly better, on average, than unsophisticated investors. Sounds like he was right.
The Madoff situation was not the result of deregulation, it was the result of a massive fraud. I must admit that I am very puzzled by how long the fraud continued, but I can see how investors were deceived with the following: a lot of other smart people (Mort Zuckerman, hedge funds, fund of funds, banks) were invested with him, so he must be good, right? So why do diligence?
That said, I am very surprised that the financial institutions did not at least investigate the accounting firm Madoff used. You would think a multi billion fund would use an established accounting firm - big red flag.
"Somehow, even though everyone agreed that this was the sort of thing the SEC should be aggressively rooting out, and the SEC has perfectly adequate resources to investigate high-profile fraud at a 20-person operation, the SEC dropped the ball so hard it's probably even now still falling through the Earth's mantle towards China."
True. And thus I would say you are narrowly correct that it's not _more_ regulation that is needed in this case, but proper enforcement of existing regulations. However, it strikes me that the idea that government regulation is always and everywhere a drag upon the efficient and necessary operations of the market is a motivates the believer not only to remove regulations, but also to enforce laxly those that exist. And when you think of your role as to do your best to get out of the way rather than to zealously pursue malfeasance, it is inevitable that you will drop some awfully big balls.
An awful lot of effort is being wasted trying to pin blame on gvt, trying to 'figure out how to prevent this from happening again.' Unfortunately this energy is directed towards somehow preventing the FREE CHOICE of people to make their own investment decisions. These investors were not innocent bystanders: they were profiteers. They are little different from the typical Enron investor who was more than happy to put all their retirement funds into one stock, see the stock go up astronomically, and then whine like babies when the whole scheme crashed down. They are little different from the people boasting about their house flipping skills, their multiple homes and mortgages, their seemingly unrivaled skill at risk managment and financial genius - and of course when the housing market fell these wizards of financial manipulation began to cry "we didn't understand the mortgage agreement!"
Its one thing to find out how Madoff violated laws, if he did, its another to actually _worry about_ those that were so foolish to lose their pocket change. The investors in this scheme were seeking financial advantage above others. They were "smarter" than the avg investor, they were 'connected' and tapped into that "special deal" we all hear so much about. Well, all that needs to be done is to laugh at them. Yes, laugh at them for the greedy, stupid, fools they are.
It was a perfect storm of pride, greed...and a fumble.
But, as per usual, we'll have to have a sob fest for them because, well, they're rich and lost money.
Why? Who is having a sob fest for these people? I haven't noticed anyone in the media crying any tears. There seems to be a fair bit of outrage that he got away with it so long, but not anyone feeling deeply distresssed about rich people losing any money. Can you name some names of people who have said we should be feeling sorry for these investors?
As opposed to all the OTHER, regular, little people who get caught up in Ponzi schemes every day, lose their nest egg, and receive no response from society other than they should have been more watchful over their own money.
Please check Wikipedia at http://en.wikipedia.org/wiki/Ponzi_scheme for a list of schemes and their societies' response. Many societies impose prison sentences on the organisers of these Ponzi schemes. These admittedly are not often a help directly to the investors who lost their money, as the Ponzi organiser has by the sheer way the scheme operates not enough money to pay them back, and there are cases where the fraudster manages to escape justice, but it is most definitely is not a univeral rule that society has no response.
Again, from a libertarian point of view, how is this any of our concern?
Intellectual curiousity. And, quite possibly, a prudential interest in avoiding falling into a similar swindle yourself (depending on your investment policy of course, it may be that you, personally, have some method of avoiding Ponzi schemes entirely, so your only possible interest in this topic matter is intellectual curiousity).
Hey, SoV: how did SEC find out about this?
NYT sez it was his sons turning him in: "And when Mr. Madoff finally told two senior executives of his problems, he chose to confide in his sons, who would notify the authorities and begin a quick countdown to his arrest."
Click on my handle for the link.
Scentofviolets - that link is from a union that purports to represent SEC staff. Not sure what percentage of the current staff are actually members, but regardless, the union is just doing what unions do - pushing for ever larger pay increases.
In reality, the SEC is already one of (if not the)most well funded and professional federal agencies. SEC staff make way more money than most federal employees, and that is out of necessity because the SEC has to recruit people out of very highly paid private sector positions. I work with the SEC staff on a regular basis, and have a number of close personal friends at the agency. They are most definitely NOT suffering from a lack of funding, morale or White House support for a strong investor protection mission. According to my acquaintances, the Madoff failure was simply a big screw up. The SEC is very good at rooting out sophisticated fraud, especially in accounting gimicks. But they, like most human beings, are simply not that good at identifying accounting statements that are simply made up out of whole cloth. Hindsight is 20-20 though and I'm sure plenty of people will be calling for heads to roll.
Madoff engaged in fraud, and he got caught. End of story.
You might want to actually read up on this story before commenting. Just a suggestion.
Scent of Violets:
The question you have to ask is, was the regulation ineffective because of the particular ideology of regulators or president, or was it ineffective because it just doesn't work too well, or requires outstandingly brilliant and dedicated regulators to work or something? I have no particular intuition about this. l=Large-scale financial fraud and meltdowns of financial companies happens under Democratic as well as Republican regulators. I wouldn't be surprised, though, if Bush Administration regulators were just much worse than nearly everyone else's regulators--that would fit the broader pattern pretty well.
The astonishing thing to me is the idea that at Madoff's firm, nobody other than Madoff knew about the fraud. There *have* to be several people who were at least aware of it.
SoV, Chris Cox was appointed in 2005 according to Wikipedia. Markopolos wrote a letter to the SEC in 1999 saying the scheme was a Ponzi scheme and asking them to investigate it. Chris Cox may have stuffed up, but so did whoever was running the SEC before that. This fraud dates back to the Clinton era at least.
http://money.cnn.com/2008/12/15/news/economy/madoff_SEC/index.htm
A Judge has already ordered that the investors may receive some protection. Who wants to bet that in the end they quietly have most of their money returned to them? I don't care if the media cries tears or not, but when the rich are defrauded they get protection when the poor get defrauded it's typically "tough luck, but you know what they say a fool and his money is soon parted"
Uh, yeah, I have a method to avoid ponzi schemes entirely. Don't invest in something you don't know anything about. It bears repeating - working the market is just a form of gambling. Nothing more, nothing less. You can't beat the house, there aren't any discernible patterns, all known ways of getting ahead rely, not on superior insight, but on superior information. Which, not surprisingly, is frowned upon in a lot of cases.
This most definitely is _not_ rocket science.
Yes, the horse has well and truly left the barn on this particular fraud, but I think you're too glib about "what can be done" in the future.
Most of the focus on the Madoff scam has been on the implausibility of his reported investment performance. The regulators and the financial institutions that invested with Madoff should have known it was too good to be true, should have done due diligence on his investment strategy rather than accepted the "black box", etc.
For me, however, the big question I haven't seen anyone address is "where the f**k was the custodian"? If Madoff had been running a regulated investment company (mutual fund), the cash and securities would have been held by an arms-length independent custodian. And Madoff's accountant (who had to be in on the fraud) would have had an outside check that would have eventually uncovered the two sets of books Madoff had to be running because there would have to be random confirmations of customer records with custodial records.
Instead, the only explanation I can come up with is that Madoff was handling the investments in segregated broker-dealer discretionary trading accounts for which he was performing the custodial functions while the cash and securities were comingled and held in his name. And his investment management activities, and the funds invested, were somehow treated as an unregulated investment advisory business, not part of his regulated broker-dealer business. So, under that theory, it wasn't the focus of SEC supervisory activities. Also, Madoff's B-D wasn't an NYSE member -- market-making in NYSE stocks was where he built the bulk of his legit business -- so he didn't have NYSE supervision. Accordingly, no reporting or examination of his investment management business.
Regulatory gaps are the only way I can explain to myself how Madoff's scheme could have gone on for so long and have involved such astonishing amounts of money.
Should the US securities regulators have examined carefully an unregulated affiliated business as part of its supervision of the B-D? Obviously, especially since he must have been using the B-D to run the trades for the investment advisory business. But the regulators don't seem to have looked into the "investment advisory" business, which means there's something fundamentally screwed up about the regulators' "scope of examination" practices which Madoff took advantage of. Heaven knows how many others have done the same.
Should the lack of an independent custodian have prevented fund managers from placing their customers' funds with Madoff? Obviously. Verifying custodial arrangements is one of those basic functions fund managers are supposed to perform when they select third-party investment managers. They're also supposed to periodically verify that the custodial arrangements are working properly. You wouldn't believe how much attention by fund managers is paid to appointment of custodians when they decide to invest in a new emerging market!
However, if Madoff was providing segregated B-D accounts as the vehicle for handling the cash and securities, the financial institutions may have assumed that the B-D's cash and securities safekeeping functions were being examined by the US securities regulators. Foolish, but not altogether outrageous "dropping the ball."
In any event, it's too easy to shrug it off with "we can't fix this by new rules." I think there are going to be some useful lessons for plugging some gaps in regulatory coverage of the back-office of businesses which, regardless of their legal form (adviser, hedge fund, or what have you), handle other peoples' assets.
I think another lesson is that the "sophisticated investor" exemptions from some basic regulatory requirements aren't going to survive this financial meltdown. The "shadow banking system," which includes the shadow investment management and hedge fund industry, needs to be brought within the regulatory system, if only to make market disciplines more effective. I don't think institutions that only deal wholesale or with high net worth individuals need to comply with all the consumer protections that constrain the business of firms that deal with small retail investors or depositors. But we do need to apply universally some basic rules and supervision that provide safeguards against large-scale fraud and systemically significant risk-taking.
If investors fail to ask simple questions, they get burned. A simple due diligence step - asking for the audit and who the auditor is, would have been sufficient here.
But people don't do that when they feel greedy, and they engage in all sorts of distraction about how the government should have protected them from themselves.
Really? So they're just making up the fact that there had been a hiring freeze on for at least two years? Do you have any cites to that effect? Or are you just pulling this out of the air, going by 'what someone told you'? Why, look, just by typing 'SEC reducing staff' into google, I get all sorts of links. Like this:
and:
Or how about :
There's much more, and well worth the read. So my question, dsr, is did you even bother to do the most elementary research before posting? Or did you just go with your gut and 'what people told you'?
This stuff is not at all hard to find.
I don't know why you want to make this into a partisan thing(not strictly true.) I could care less if 'Democrats do it too', and in fact, that does not excuse subsequent poor performance. The only thing I would like to see from you would be some sort of documentation about your claims above, as well as the SEC's response, and it's funding and enforcement practices at the time.
That's interesting what you say, ScentofViolets, but I highly doubt that the staff reported to the commissioners, "We have a newly-registered investment advisor who appears to be running Ponzi scheme. The volume of options trades reported to investors exceeds total market volume most days. He's audited by a two-man outfit on Long Island." If they had, I doubt the commissioners would have said, "He's a big Democratic contributor. Leave him alone."
So it seems to me that the SEC staff has clearly been focusing their enforcement activities on the wrong targets. Nonetheless, we can probably both agree that Cox should be fired or impeached, presuming that either is legally possible.
Scent of Violet, I am impressed by the confidence you display in your investment strategy. I however fear that I have more to fear than you do. I have plenty of evidence from my personal history that just because I think I understand something doesn't mean I actually understood it. Consequently I have a personal interest in why other people invest in such schemes, as I think my poor brain needs as much help as it can get.
And the remarkable tendency of people to fall for frauds implies that I am not the only person on the planet dumb enough to need to worry about falling for them.
Hey, SoV:
Again, what makes you so sure that "the SEC did catch this guy in the end"? He didn't get caught, he gave himself up!
From the SEC press release (click on my handle): "The SEC's complaint, filed in federal court in Manhattan, alleges that Madoff yesterday informed two senior employees that his investment advisory business was a fraud. Madoff told these employees that he was "finished," that he had "absolutely nothing," that "it's all just one big lie," and that it was "basically, a giant Ponzi scheme." The senior employees understood him to be saying that he had for years been paying returns to certain investors out of the principal received from other, different investors. Madoff admitted in this conversation that the firm was insolvent and had been for years, and that he estimated the losses from this fraud were at least $50 billion."
I suggest that you were wrong.
the SEC dropped the ball so hard it's probably even now still falling through the Earth's mantle towards China.
[pedant] Actually, if you check an antipodial map, I believe you'll find that the opposite point on the Earth from NYC (assuming that's the location of the drop) is somewhere in the southern-eastern part of the Indian Ocean, near Australia. The ball would have to be dropped in Argentina or Chile to hit China. [/pedant]
Sorry, Tracy, but saying 'I thought I understood' just doesn't cut it. I have students who nod their heads all the time in class, who indicate they understand the discussion. But when it comes to test time, it is very obvious that a great many of them don't.
Now, they're just students, students, moreover, fresh out of high school (my older students have a lot less problem with asking questions, admitting they don't understand, etc.) They don't know any better.
But you do. So unless you can give me some sort plausible reason for why your diagnostics which indicated your degree of understanding failed - you did and do use those, right? - I'm afraid I'm going to have to say I just don't believe that you ever really took the effort to see if you really 'understood' those things.
Oh, and Tracy? Reading the various fallout articles, it is made abundantly clear that the people handing over their money did not understand what was going on; probably on account of the fact that they say 'I didn't understand what was going on.' Buffet rather famously avoided the tech bubble; I say famously, because he is the classic example of what I say: He said that he didn't understand the business models or how they were making this money, so he didn't invest. End of story.
As a sidebar: please, don't try to be snide. It only works under certain circumstances, and unless you can pull it off, and are sure you won't suffer from your gamble, it ends up making you look foolish in a very mean way.
Anything less than life without parole will lead to more scams like this. Presumably Madoff wasn't doing this as a hobby. Suppose that he raked off $1 billion of the $50 billion and deposited it in a bank on Grand Cayman (as he would be a fool not to have done). Even a dead certainty of being imprisoned for 10 years works out to $100 million in "earnings" per year in prison. Would you spend a year in federal prison for $100 million? I would.
There was a smaller scale version of this working in Houston that duped a number of wealthy business owners, ball players and the like. They advertised 1%/month to investors and claimed to be investing in sub-prime mortgages and commercial loans. They ran radio ads on some of the talk stations and wanted a $100k initial investment, IIRC. It ran from 1999 or so until late 2001. The three guys that organized it are going to jail.
Nadezdha's analysis of reglatory gaps regarding broker-dealers and segregation of funds sounds exactly correct per what I've been reading at Henry Blodget's blog (Clusterstock), both from Blodgett and his seemingly very knowledgable specialist commenters.
Beyond the obvious points about greed and due diligence, there's also the wrinkle that at least some investors strongly suspected that somethng wasn't entirely kosher but thought that they were among the beneficiaries rather than the victims.
In light of the failure of the investment professionals involved in feeding funds to Madden -- the investment advisors, hedge fund managers et al -- it really does call into question the notion that these are exceptionally smart and talented individuals who work exceptionally hard, have deep resevoirs of special knowledge, and are rewarded for their higher order thought processes. Some unquestionably are one or another of these, a very few fit all of them. But a lot are just cogs in the machine, the financial equivalent of GM assembly line workers or folks at the local DMV. They take an order and process it according to how the system is built not according to anything special they do or know or think. Can we please stop pretending that their compensation is based on the added value they create.
This reminds me of what Arnold Kling calls the "Masonomist" approach:
http://www.tcsdaily.com/article.aspx?id=101007A
The fact that many righties don't like the government should in no way imply that any of us think the free market is perfect.
Who wants to bet that in the end they quietly have most of their money returned to them?
Depending on what you mean by "most," I'll take the opposite side of that bet, and clean your clock with it. I worked on a case involving a very similar fraud running in the hundreds of millions. The defrauded investors were extremely lucky; the receiver in charged managed to scrape up something like 1/3 of the value of their "investments" for distribution over 5 or 6 years, but the overwhelming bulk of that was from a single account snapped up in the first month or so after the SEC stepped. The money has been paid out to earlier investors (from whom it will be very expensive to recover) and/or spent. They have probably seized 75-90% of everything they will ever recover already.
I could care less if 'Democrats do it too', and in fact, that does not excuse subsequent poor performance.
I deduced that the mere fact you were posting here meant that you did indeed care about financial fraud, so I do not know why you felt the need to assure me that you could care less, but thank you for this information. I have stated my own reasons as to why I could care less about financial fraud, I will repeat them here just for clarity - I fear that if I did care less about them I would fall victim to such a fraud.
The reason it is valuable to note that the SEC failed to investigate Madoff before Chris Cox arrived is that it indicates that we should look to different causes of their failure to investigate.
The report that Markopolos wrote to the SEC in 1999 is widely reported in the media, see for example http://news.google.com/news?hl=en&ned=&q=Markopolos+madoff
I do not know of any reports about the SEC's response, and its funding and enforcement practices at the time. I am sorry I am unable to help you further on this matter.
Sorry, Tracy, but saying 'I thought I understood' just doesn't cut it. ... But when it comes to test time, it is very obvious that a great many of them don't.
This was almost exactly the scenario under which I learnt that for me personally, there is a big difference between thinking I understand things and actually understanding them. The only reason I say "almost" is that I doubt you were my professor at university.
They don't know any better.
But you do.
Really? What evidence do you base that assertion on? I have extreme doubts that I know better.
So unless you can give me some sort plausible reason for why your diagnostics which indicated your degree of understanding failed - you did and do use those, right?
I did not invest in the Madoff investment, I have not lost any money on that. I did not know that the Madoff investment ever existed until it collapsed. However, ever since I came across the book "The Madness of Crowds" I have maintained an interest in financial frauds, for the reason I stated above.
On the more general question, if I was to list all my diagnostics as to why I failed to properly understand something this would take a great long time, some examples are:
- I managed to slide through high school getting high grades without much study, and thus didn't believe warnings at university that I needed to study mathematics more.
- It is hard to find diagnostics about the future, so false beliefs encouraged by personal biases (like the voters have to come to their senses about Winston Peters) can persist for a while.
- I only tested at warm temperatures, not cold temperatures.
I'm one of those dull people who has to come at knowledge the hard way.
As a sidebar: please, don't try to be snide. It only works under certain circumstances, and unless you can pull it off, and are sure you won't suffer from your gamble, it ends up making you look foolish in a very mean way.
Stupid question time - what did I say that was snide? Do you believe that I am immune from falling from frauds? Do you believe that no one else falls for frauds?
Suppose that he raked off $1 billion of the $50 billion and deposited it in a bank on Grand Cayman...
...then the SEC will get it. Bank secrecy is far more hype than reality in the age of the MLAT.
But a lot are just cogs in the machine, the financial equivalent of GM assembly line workers or folks at the local DMV. They take an order and process it according to how the system is built not according to anything special they do or know or think. Can we please stop pretending that their compensation is based on the added value they create.
Yes -- even when not fraudulent, an awful lot of Wall Street is a 'who you know not what you know' rent-seeking business. I especially loved the account of J. Ezra Merkin's 'Ascot Partners' -- a hedge fund that charged its clients 1.5% just to hand all $1.8B of the money over to Madoff. No research, no strategy, zero value add -- $27M a year in fees for an operation you could run from a single cubicle or a corner table at Starbucks in your spare time.
But Megan, don't you understand, it's the zeitgeist of the Bush years that caused it! Seeing Cox get appointed gave Bernie the idea that he could get this past the SEC. And then when Katrina happened and he saw how Mike Brown dealt with it, Bernie had made up his mind: he was going to defraud everyone because it was obvious the Bush administration will never catch him since they're all asleep at the wheel!
We don't even need to have evidence. We can just spew unfalsifiable claims left and right to suit our political prejudices. Yes, Scent of Violets, I'm talking about you.
Oh yeah, and CDO's are evil, CDS's are evil, and everyone on Wall Street should go to prison. Why? Because they stand in the way of the proletariat.
I think it is truly excellent that SoV hounds everyone else for evidence, but can't be bothered to address a simple mistake that he made. It shows the level of intellectual honesty that he has.
Irony lives!
SOV - In 1999, a skeptical investor dropped a dime on Madoff, writing to the SEC that he thought the Madoff operation was a Ponzi scheme. You may recall that in 1999, Bill Clinton was president. Nothing came of that warning letter to the SEC, nor of any of the subsequent ones during the Bush presidency. I don't see how to view this other than, as Megan put it, a massive failure over many years by the SEC.
Megan is also right that no new laws or regulations are needed here. Madoff committed criminal fraud for which he can go to jail for many years; what else are you going to do, add the death penalty for fraud?
What we need is an investigation of the SEC staff to figure out why they were unable or unwilling to follow up on the various complaints they received about this scam over a period of several years.
SoV, as I noted above, plenty of very smart, sophisticated investors got caught up in this and there are plenty of other examples of fraud where investors got badly hurt (Enron and Worldcom come to mind). Perhaps some sympathy is in order for those hurt rather than telling everyone on this blog how much smarter you are than they are.
Just a thought: If you're going to blame the "highest levels" of government for the "examples they set" whenever there's a scandal, this would be a perfect opportunity to criticize Social Security.
After all, if the government says Ponzi schemes are okay, why not? The government's accountants seem to think that if you pay earlier investors directly from later investors, that's totally okay, just as long as you, like, really intend to make enough megaprofits later to cover both.
Sickening.
SoV (or is it B) - No, I did not do any "research" before posting. If by research you mean trawling the internet for opinion pieces that match up to my chosen argument. I was simply attempting to make a reasoned response based on my 10 plus years in the securities industry, most of which has been spent, as I said, working directly with the SEC and gaining a first hand knowledge of its strengths and limitations, especially in its review of disclosure filings. If I had any more time to waste on a two-bit internet discussion board pissant like you I'd point out that staff headcount is really only part of the story in evaluating the effectiveness and commitment of the Cox SEC, but frankly I have better things to do.
"The people he bilked weren't unsophisticated consumers of the sort that we assume need regulatory protection. They were extremely rich people, many of them with backgrounds in finance."
No, in fact most of these people were very seasoned veterans if not actual industry insiders.
The insiders knew he was up so something. His growth trajectory was too perfect for too long yet none of these folks cared as long as he made it work for them.
That's simply greedy people choosing to look the other way.
They do not deserve a bailout - they deserve the "haircut" like the rest of us.
There is a very direct connection to the Bush administrations illegal wiretapping and the use of that info for political purposes, Elliot Spitzer's prostitution issues (and how did the NSA get that illegal wiretapping info filtered and over to the FBI without specifically searching for Spitzer's Credit card usage info??)and this decades long finance industry Ponzi scheme.
These people should not receive a bailout for gambling. But because they are the wealthy elite class ( also known as Bush's base) I'm sure they'll get one along side Hank Paulson's financial criminals in the banking industry.
The finance industry's house of cards is collapsing and (like so many Bush's and their financial shenanigans before), we tax paying former middle class types will again have the "privilege" of covering their theft.
Can't trust the banks. Can't trust the bankers. Can't trust the politicians. Can't trust the dollar.
Who in the financial sector can we trust these days to be honest, to have INTEGRITY?
It would appear that the answer is no one.
Boy that free market thing really kicks ass.
While it's pretty clear that the time for serious oversight and regulation of the finance industry has arrived, we all know it won't happen as long as the bankers and the politicians are in bed together.
The truth is this- we will fix the gaps in regulation that most benefitted Madoff's fraud (see Nadezhda's comment above- a must read by the way), and someone else will find new gaps for fraud, and investors, assured that Ponzi schemes are a thing of the past, will "invest" and lose their money with promises of outsized returns dancing in their heads.
It is too bad (or maybe not- his name is going to be remembered for centuries) for Ponzi that he had such an unusual name, or this fraud-type's name would be known as a Madoff scheme from this point forward.
If we're not weeping for them we're sure having quite a collective rehashing for their sake.
I still fail to see where this extends beyond mere greed, stupidity and lack of information.
But--but the investors tried to be knowledgable or involved. As involved as anyone else.
If you invest $30 million with someone my advice is you make SURE that person isn't scamming you.
I'm sorry but this is third grade level stuff your mother or father taught you. If something's too good to be true . . . well at least make sure you examine it VERY closely.
And by the way the attempts to TURN this into somehow an attack on Cox or Bernanke by preemtively mentioning them BEFORE anyone on the other side does is pretty low.
No one's blaming them. Certainly no one was blaming them, in this case, before the glibertarians and partisans immediately began to DEFEND them before anyone even accused them of any wrong doing.
It's another smokescreen to hide the fact this requires a story because it's somehow special as opposed to what it really is: they got SWINDLED. Pure and simple. With the amount of money they had on the line they should have either: a) known better or b) stopped whining about it as soon as they reaped the whirlwind.
Next time watch your money more closely.
Yeah, having the government run businesses works out so much better. The trains run on time and no one ask inconvenient questions. For long.
1) I tend to agree that this is not a failure by the SEC. Regulatory failures on the part of the SEC generally take the form of "Let's defend this widely-known industry practice which is an unfair deal for mom and pop investors," not "Let's cover our eyes and refuse to investigate up a massive fraud."
2) The fact that someone sent a letter in 1999 arguing that Madoff was running a Ponzi scheme is interesting, but it depends what was in the letter. People write overheated letters to the SEC complaining about financial advisers all the time. If the letter laid out some facts that backed up that charge, that would be a different story.
3) nadezhda's comments are very interesting. I don't know enough about the back office stuff to assess it but my strong sense is that that's where the bodies are buried here.
[The people Madoff bilked] do not deserve a bailout - they deserve the "haircut" like the rest of us.
And they're not going to be bailed out. The liquidator will try to get hold of all assets of the firm being liquidated, including trying to track down and claw back any assets distributed to Madoff, his family and other insiders. To the extent the B-D has cash and securities in its possession, securities that are registered in the name of customers will be distributed to them along with up to $100K of any cash that was supposed to be in each customer's account. Then the liquidator prorates the remaining cash and securities among the customers according to the size of their unpaid accounts. SIPC (the securities industy's version of deposit insurance) will then make up shortfalls. But the maximum amount SPIC guarantees is $500,000 per customer.
There doesn't sound like there will be a whole lot of cash and securities to distribute to customers, so the SIPC guarantee is probably the best most investors are going to see out of this fiasco. And note, that's $500,000 per customer. If an investor had his funds with Madoff via another investment fund, it's the investment fund who's the "customer". So if a feeder fund had 20 investors, each with in theory $1m in Madoff's hands, still the fund can only recover $500,000 from SIPC, not $10m.
So regardless of the $50b of alleged total losses, the overall exposure to the SPIC system -- which is funded by insurance premiums paid by registered B-Ds -- is probably not going to exceed the low $ billions, leaving Madoff's investors having to eat huge losses. For those who invested through intermediary feeder funds, they're going to go after those funds' management for a host of fiduciary duty failures. How much the investors will ever see depends on the facts and law in each individual law suit, plus how deep the pockets are of the intermediary funds.
Since I did not write what you impute to me, I have difficulty responding to this, except to note that perhaps you should read more carefully. I did not say I don't care financial fraud - and if you want to say this is how you read it, you'd best point out the relevant words, and why they led you to that conclusion.
I did say I could care less about political affiliations of the amdinistrations under which they occured, by they Democrat, Republican, or other. Why would you then infer that I don't care about financial malfeasance?
If that is the case, then why mention whose administration under which these lapses occured? If you will look at what I have written, you will note that a) I pointed out that saying 'the government failed' is not a reasonable comment without noting what shape the organization is in, and b) I posted links to indicate why I thought the organization was dysfunctional. I do not claim that this was an exhaustive search, merely a sufficient one to support my point.
You, otoh, are not telling me anying about the state of the SEC under Clinton. Was it underfunded? Undermanned? Run by incompetenats, or being overruled by authorities who had no business doing so? If none of those things are true, maybe a long close look at organizational or governmental failure is called for. If, otoh, one or more of those things apply, then, no, one cannot reasonably say that 'the governemnt' failed then either.
And if you want to take the former tack, it is up to you to do the research. Not on me to do your research for you.
Sigh. How old are you? I'm basing this on your age, and your implicit insistence that you're reasonably intelligent and know what you're talking about. If you're on the young side, say, under 25, or you want to say that you realy don't know what you're taling about, I'm willing to cut you some slack.
So unless you can give me some sort plausible reason for why your diagnostics which indicated your degree of understanding failed - you did and do use those, right?
Again, you are not responding to what I wrote. I did not ask for diagnostics as to why you failed to understand something.
I asked for what is your criteria, your diagnostics for deciding that you do understand something? What convinced you that you understood something, only later to find out that you really didn't?
I'm not saying that you are, particularly. I'm warning you that you seem to be veering that way, perhaps unintentionally. Nothing more. Notice that I have asked you why I wrote one thing you thought another, and to please quote the offending words. Iow, I am willing to entertain the possibility that I do not write with perfect clarity.
God has answered my prayers.
And yet, still no acknowledgement of your error or proof that the SEC caught Madoff.
Gene2 wrote:
I know that you were trying to be sarcastic here but let's face it, the Bush administration was asleep at the wheel, and when it wasn't asleep at the wheel it was actively corrupt and/or willfully incompetent. Like it or not that sort of thing does send a message. It would be interesting to see James Q. Wilson extend the "broken windows" theory to crimes such as this one.
One thing is very clear to me, Bernie Madoff should go to jail for the rest of his life, they should lock his ass up in a SuperMax prison and let him out on alternate Tuesdays for 30 minutes of daylight. Really, if we're going to lock people up forever for having an ounce of cocaine on them then the least we can do is lock fraudsters such as this up forever. This is assuming of course that one of Madoff's clients/victims don't have him killed. I'm sure that someone on Madoff's list of wealthy Jewish victims could make a phone call to someone in Israel who would call someone in the Mossad and the next thing you know Madoff is found face down in a gutter with two bullets in the back of his head.
The problem here is greed. At the most basic, simplest explanation: people got too greedy. People didn't care that they got too greedy.
We need to re-teach ourselves ethics. Ethics about overreach. Ethics about acceptable risks not just to ourselves but to others (and thus to the economy as a whole). Ethics that says it's better to get 5 mill a year that's gotten honestly, that says we don't need 50 mill a year from something that's from a 'gamed scheme' too good to be true.
What's that golden rule of con artists? You can't sucker an honest man? We need more honest men (and honest women. And honest small furry creatures from Alpha Centauri... and yes I've read Douglas Adams. It keeps me sane).
Of course it's Bush's fault.
I understand this is hard for some of you who are too stupid to understand simple logic.
1. Bush exists.
2. There are problems in the world.
Therefore, those problems must be Bush's fault. Why, just look at his face and you can tell that he's stupid.
Furthermore, all you people who are too stupid to understand this should just shut up and go away. It's fascists like you who always try to undermine the will of the common people.
actually, i found it extremely satisfying.
greedy people got burned. greed trumps brains. greed trumps common sense. the desire to be higher status in your peer group causes lots of bad decisions. humility is hard work, and being thrifty has looked like a sucker's bet a lot recently.
neither markets nor government can cure human nature. Aat least markets don't purport to.
The government failed? You mean, that appointing clueless, business-friendly hacks like Chris Cox to head an agency that's supposed to be tough on business is maybe a bad idea?
Apparently Chris Cox was so amazingly business-friendly that he retroactively prevented the Kennedy, Johnson, Nixon, Ford, Carter, Reagan, Bush, and Clinton administrations from uncovering the fraud, too.
PaulW,
You talk about greed like these people were getting 10% a month rather than 9-13% per year. Now 9-13% consistantly is impossible. But, if Berkshire Hathaway can have a lifetime return of %24.73 and the lifetime return on the S&P 500 was until recently 12.54% is it that hard to belive it's possible to earn a steady 10%?
And yes, it's a little hard to belive. But, if I have $10 million and I gave Bernie $1 million to start and year after year it had done well. I could see myself giving him 50% of my money. Now, I would never give anyone or any firm 100% of my liquid assets. But, I could see how these people got taken.
The rates were high, but not that high.
Also, keep in mind that for many of the years in question, Bernie was underperforming the market. His returns were never above 13% a year - so in those years when the S&P was up 25% and Bernie was only up 10% that would also tend to confirm that he had figured out a way to stablize those returns.
Snap my brother. No, make that a double snap in Z formation!
Any chance Madoff could have a public hanging?
NPR confirms NYT and again disproves SoV's comment that "Finally, I'll note that in fact, the SEC did catch this guy in the end."
NPR sez (click on handle) no, they didn't: "Why that didn't happen is a question a lot of people are asking right now. Madoff was able to operate for years with little apparent oversight from the Securities and Exchange Commission, and it's not clear regulators would have caught on to his crimes had his sons not turned him in."
When will ScentOfViolets apologize for getting it wrong?
re: not greedy: no, his returns were not 9-13% a year. they were 2-3% a month.
Interesting that the media was all over McCain when he suggested firing Cox. In retrospect, he may have been right.
Allison,
Where did u read that? The nytimes was reporting 9-13%.
SoV, the American habit of saying "I could care less" in circumstances where they mean they don't actually care at all is very confusing. I could care less about losing my savings to a fraud, I could care less about burning myself on a hot stove, I could care less about my broken finger nail, I couldn't care less about who wins the next football World Cup or whatever they call that particular contest. (On a relative scale, I care more about the first two items in my list than the last, the ranking of the first two varies depending on how bad the burn is). You advise me not to veer towards being snide, I advise you to avoid such a silly phrase on the Internet unless you can add the sarcastic tone it was presumably first used with.
You, otoh, are not telling me anying about the state of the SEC under Clinton.
This is because I don't know anything about its state. Except that it missed picking up on Madoff's fraud.
If, otoh, one or more of those things apply, then, no, one cannot reasonably say that 'the governemnt' failed then either.
So if the government fails because it underfunds, or undermanns, or selects incompetents, or the wrong authorities overrule it, then that's not "the government" failing? Any of those lists of reasons sounds to me like the government failed. However, I don't like quibbling about terminology, if you want to insist that none of those things are "government failure", then I will use the word "political failure" to incorporate all these things, plus whatever you wish to call "government failure".
So the failure of the SEC to notice the Madoff fraud before Chris Cox was appointed its head means that whatever the cause of such political failure, it is not down entirely to Chris Cox. Chris Cox may have been an incompetent, and/or he may have deliberately underfunded the agency, and/or whatever other explanation of the SEC's failure you wish to lay at his feet, but presumably his predecessors had equivalent, if not necessarily identical, faults.
I do not need to generate an alternative hypothesis in order to disprove the hypothesis that it was down to Chris Cox.
Sigh. How old are you? I'm basing this on your age, and your implicit insistence that you're reasonably intelligent and know what you're talking about.
Well if by "reasonably intelligent", you mean I know enough to have doubts about how well I know what I am talking about, then I'm "reasonably intelligent". If by "reasonably intelligent" you mean I can always distinguish between when I know things and when I merely think I know them, then I believe am not reasonably intelligent and my apologies for saying anything that appeared to implicitly insist that I am reasonably intelligent by that definition, it was entirely by mistake.
I do maintain that I know what I am talking about when I express fears that I may fall for a fraud.
This is very weird. It is one thing not to be believed if I was claiming that I had an IQ of 180 and a PhD from MIT, but not to be believed when I claim that I have doubts about my ability to tell the difference between thinking I understand something and really understanding it? Is there any evidence that could convince you I have reason to worry about my intelligence?
I asked for what is your criteria, your diagnostics for deciding that you do understand something? What convinced you that you understood something, only later to find out that you really didn't?
My apologies for misreading your question. My starting principle is that all knowledge beyond that provided by pure logic and mathematics is tentative - I am inclined to think Karl Popper was right when he said that we can never prove theories, we can only disprove theories. I can however increase or decrease my confidence level in a particular theory. The way I do that is by making predictions and then seeing if the predictions turn out to be right or not. This is easily done with things that can be quickly tested, eg does burning smoke set off the fire alarm, but for many matters waiting is involved. Eg, when I vote I make a prediction about how well the different candidates will perform in office, and then after the election I have to wait for an indeterminate length of time to find out. Except once, when I found out even before the election finished (it was a postal ballot and the chap I had voted for was arrested before the voting period ended).
So to summarise, if my predictions turn out to be wrong, I diagnose that my understanding was wrong. If my predictions turn out to be right, my confidence in my understanding increases, but I do my best to maintain an awareness that I might still be wrong, by reminding myself of times when a few accurate predictions were followed by a false prediction.
What are your criteria and diagnostics?
Apparently Dan is so amazingly illiterate that he cannot distinguish the singular from the plural cases, or that one person given as an example does not mean that this is the only person.
You want to dial it down a little bit Dan? If you want to say that the SEC was competently manned and funded under, say, Clinton, why don't you just post some evidence instead of being gratuitously (and incompetently) hostile?
But Megan didn't say that; she said 'the government' failed. Just to make sure there is no mistaking her intent, note that she also said that 'the market' failed. If you look at what I have posted, you'll see that what I've pointed out is that there was a failure at the SEC, but there is a difference between failure because of deliberate attempts to make an agency powerless and ineffective, and failure because the notion that the whole concept of government oversight is dicey.
I agree wholeheartedly. I can't answer to previous eras, but I'm pretty confident that it will turn out to be the case that under the Bush administration, the SEC was deliberately rendered impotent to pursue certain cases. This is nothing new or controversial, btw; I've heard complaints about the 'toothless' SEC for decades - well before Clinton, and since at least Bush I.
This is the other point I wanted to address - the idea of the 'sophisticated investor'. This has struck me for a long time as just so much ego massage oil. I suspect that most 'sophisticated investors' don't realize much, if any, better returns than what would be expected by chance over the long term. But it pleases those who 'make money' that they have skillz, savvy, intelligence, and there are legions of publications willing to suck up to these people who have no problem printing these sorts of bromides.
That's not to say that there aren't people who do make large amounts of money over the long run. But it's not because it's some sort of generalized financial expertise; it's because they know one industry really, really well, know which bets are more likely to pan out than others. If someone like Sporck or Sanders, say, or Robert Noyce starts sinking some money into some solar cell startup, maybe it means something. But somebody who thinks 'financial savvy' goes across all commodities, from pork bellies to aerospace to pharmaceuticals to tax preparation services? That, in short, this sort of expertise is transferable from sector to sector?
Not a chance.
The people who got burned by Madoff? Over and over, the story is that 'financially sophisticated' people got burned. And over and over, we here from these same people that they didn't understand how the money was actually being made, but it seemed like 'too good a deal to pass up.' That to my mind in no way has anything to do with 'sophistication' or intelligence.
The corollary towards which I have been working is that when it comes to running big institutions, big concerns, big organizations - organizations like state or federal governments - these really aren't the people you want to have running things. Cheney the 'tough minded businessman'? Bush the 'CEO president'?
Saying that your qualifications for public office is running a large and successful business should be treated as a red flag by the electorate.
Point taken. As I side note,(where are you posting from) do you also have the American 'flammable' and 'inflammable', both of which mean the same thing? And no, I wasn't being sarcastic the first time; I just get really, really tired of people accusing me of being 'partisan' or a 'liberal', etc. When people tell me that 'Clinton did it too', for example, as if the fact that 'my guy' did it too is remotely relevant, it makes me want to pull out my hair. Like my mother used to say, 'If Jimmy Nitch jumped off a cliff, would you do it too?'.
The point here is that saying 'the government failed' has something of a double meaning. Libertarians will say 'the government failed' as a sort of systemic or philosophical indictment, that it failed because it was the government, and not private enterprise. You see some of this where they advocate that, for example, private tax collectors be used, or that private firms be in the business of giving guaranteed student loans, or that private schools are 'better' than public schools.
This is quite different from saying 'the government failed' because the agency in question was sabotaged from the inside, that it was set up to fail(this seems to be something of a Bush Administration specialty, with everything from FEMA to the EPA to the Dept. of the Interior, etc.) by appointing administrative heads who made sure that the organization was ineffectual, or by systematically underfunding the official mandates, or by making sure there are too few personnel to do the job properly.
You want to dial it down a little bit Dan?
Do you want to acknowledge your mistake, SoV?
I just get really, really tired of people accusing me of being 'partisan' or a 'liberal', etc.
Then if I may make a gentle suggestion, stop walking and quacking like a duck.
Many of your posts include an unnecessary dig at the hypocritical pro-rich bias of "libertoons," or a comment on the profound stupidity, perfidy, and resistance to evidence of conservatives. On the other hand, when Chet (a liberal) made a statement about battery technology which you considered erroneous, your response was measured, factual, and missing any remark about "libtards" who don't bother to learn any science before spouting off about it.
If you stop acting partisan, people will stop "mistaking" you for one.
NO. That is not how it works. First, the statement Chet made was not an ideological one. Second, it may have escaped your notice, but it's not exactly a vacuum in here. If you look back, my responses are almost always 'in kind' as it were. Tit for tat. Don't want any excessive put downs? Then don't generate any. And Rob, you know I've said that many, many, uh, many times. Third, being a 'liberal' has become a meaningless term. Don't support the war/vouchers/etc? Then you must be a 'liberal'. No, what I _am_ is an Eisenhower Republican, somewhat updated for the 21st century. Finally, to be against something does not imply that one is for something else.
You see me correcting right-wing nonsense, and sometimes rather tartly. But that is only because there is no left-wing nonsense to rebut . . . and there really hasn't been for a long, long time. Rest assured, if someone started extolling Communism or Socialism, or any other capitalized ism, I would be just as short with them. Iow, what you're seeing is selection bias.
Now, if you can actually put a finger on a position that is exclusively associated with a fringe left position, or a position that is not endorsed by large swaths of the electorate, I'd certainly like to know what it is.
You want to dial it down a little bit Dan? If you want to say that the SEC was competently manned and funded under, say, Clinton, why don't you just post some evidence instead of being gratuitously (and incompetently) hostile?
I don't have an opinion on whether the Clinton-era SEC was competent or not. I just know that they didn't uncover Madoff's Ponzi scheme either. This means that either (a) they were incompetent, (b) they were crooked, or (c) despite being honest and competent, they blew it just as badly as Chris Cox did.
I just found it funny that you blamed Bush for a fraud that not only started well before he took office, but quite possibly started before he was out of high school.
Dan, I'm sorry, but what you said made absolutely no sense(Blaming Bush for something Madoff did?). And is in no way what I said or implied.
But since you think I said that, why don't you post the offending text and dissect it?
SoV, many of your put downs are not, and cannot in principle be, "tit-for-tat," because they are are directed at groups, not individuals. And it is precisely those group put-downs that I identified as causing people to think you are liberal. If you say "You're an idiot, Mr. X," that's one thing. If you say, for instance, "There aren't many conservatives in academia because conservatives are stupid," that's quite another, and that's the one that leads people to identify you as liberal.
Now, it's true that you can think that conservatives are stupid without necessarily thinking that liberals are smart, but most people's minds don't work that way. You are correct to identify this as a cognitive error, but it is a nearly universal one, and therefore it should be taken into account if you wish to correct others' perception of you.
You are free to protest that this is "not how it works," but it is, in fact, exactly how it works. Few people think with the kind of logical precision required to ace the LSAT. Rage against it if you like, but you will make no progress whatsoever.
why don't you post the offending text and dissect it?
Well, here are your words, here:
and here:
And yet, the Times (click on my handle) again puts paid to this notion that the SEC caught Madoff:
"They (the Madoff sons) then called a friend, Martin Flumenbaum, who is a partner at the law firm of Paul, Weiss, those people said. After they told Mr. Flumenbaum about their father’s confession, he called federal prosecutors and the Securities and Exchange Commission."
You were wrong, SoV, that the SEC caught Madoff and you've repeatedly refused to acknowledge it. Your arrogance towards other commenters, seen in this vein, is breathtaking. I'll take a page from your book, SoV, and demand you apologize to Megan.
To the contrary, they are precisely tit-for-tat. When I see the volume of vitriol directed against 'liberals' acknowledged and reduced, that's when I'll cut down my counter-generalizations. It might help if people like you started calling out people who rail against 'liberals'.
Or is this one of those 'cognitive bias' things that I'm not supposed to be able to fight? I vehemently disagree.
Again, it simply doesn't work that way, for reasons I have already outlined: in large part, it is because there really isn't 'liberal' group that corresponds the conservative one. To give yet another example, someone sneering that 'liberals love the Nanny State' and that's why they oppose vouchers is an easy target; voucher proposals have been uniformly rejected when put to the popular vote (insofar as I know.) So to claim that opposing vouchers is the sin qua non of 'liberals' is simply wrong and - dare I say it? - stupid.
Or to put it another way, as I have said many, many times, to oppose conservatives does not make one a liberal, or generally approving of them, it merely makes one a 'liberal'. I would suggest that if there are any cognitive biases present, it's the insistence that there can only be two groups of people, 'liberals' and conservatives. Though perhaps I should be putting conservatives in quotes too.
Shrug. I, otoh, don't think there's much logical precision to be mustered. And you know, I've tried overtly to make the point many times that I'm a 'moderate', that I am in the middle, say 50%-60% of the electorate on just about every issue I can think of[1]. Since you have been present at these little contretemps many times, you know how often I have been mocked because of it. No, if I'm not a conservative, I must be a 'liberal'. I'll concede that this is how some people think. But this is hardly 'how it works'. And given that I'm in the business of teaching logical precision, I think I'll keep plugging away.
Btw, you could do your part by saying, 'You know guys, when ScentOfViolets complains about all the insults and crudity coming from our tribe, I think he might have a point. Maybe we should stop deriding liberals so much. We certainly don't like it when he imitates our example of how to behave.' Will you at least acknowlededge that there is vast amount of verbal abuse directed at 'liberals', here and elsewhere? Could you at least register a general disapproval against these sorts of displays . . . and not just against me?
[1]If you think this isn't true, why don't you list a few of those issues where you think I'm to the left of the general electorate? Be honest - do you really think, given the popular opposition, that rejecting vouchers can be accurately described as liberal plank . . . and not a moderate one?
When I see the volume of vitriol directed against 'liberals' acknowledged and reduced, that's when I'll cut down my counter-generalizations.
That is a perfectly fine policy for you to follow if you wish, but it will lead people to think you are a liberal (or a "liberal"). What I offer her is not logical advice, but PR advice: if it aggravates you to be mistake for a liberal, stop with the anti-conservative generalizations. Just be aware that one is caused by the other.
I would suggest that if there are any cognitive biases present, it's the insistence that there can only be two groups of people, 'liberals' and conservatives.
That is, in fact, the precise cognitive bias to which I intended refer. Indeed, I myself was called a liberal once in this very forum, for being insufficiently supportive of Israel. (It was odd on several levels.)
And given that I'm in the business of teaching logical precision, I think I'll keep plugging away.
You cannot hope to change something so ommipresent as an US vs. THEM mentality using blog comments. Like a gay pride parade, it's here, it might be considered somewhat queer, and it's not going anywhere, so you just have to deal with it.
It would also be beneficial to consider that we are not your students; nobody here has any reason to learn anything from you other than your own charm and persuasive ability. To the extent that an insistence on logical precision detracts from your ability to persuade by irritating your audience, it works against your goals.
I may be talking to a wall here, but considering that I am in the business of both logic and persuasion, perhaps I'll just keep plugging away as well.
Will you at least acknowlededge that there is vast amount of verbal abuse directed at 'liberals', here and elsewhere? Could you at least register a general disapproval against these sorts of displays . . . and not just against me?
Yes, of course, and I do disapprove, although only mildly (keeping in mind that I love negative campaign commercials because I find them entertaining).
But--and you had to know there was a "but" coming--I don't think the insult level here is particularly unusual or noteworthy, nor do I think insults are really the exclusive province of conservatives even on this very blog. Perhaps you have compiled a detailed statistical analysis demonstrating that conservatives are more likely to resort to insult than liberals or our own peculiar breed of immoderate moderate (p
Hmmm...my comment was cut off without warning.
Anyway, the last sentence merely suggested that perhaps confirmation bias was not exclusively a malady of the Right, but could be found in the (unsupported by statistical study) believe that Group A is more likely to insult than Group B.
There were a couple problems with his story there were not enough options in existence to do his "magic" with the money he said he had and the completely consistent results. I think everyone knew he was doing something like inside trading or something similar. The problem was they had no problem with the thought he was ripping off someone till it was them!
i would like to speak to the cold and misinformed person who made comments such as having a sob fest and they got swindled and are rich - not true sir we are not rich and lost everything and they should have been more watchful - mr madoff was a family friend for 30 years and was trusted - so i guess you don't know everything
Due to the nature of the crime and the effect it is having far and wide effecting not just the rich but also middle and lower classes I believe Maydoff should be executed for his crimes. Not just because it is what he should get but it will serve as a message and wake up call to those that consider fraudulent activity but also those that commit it.
Con artists always do their cons face-to-face. Part of the problem with Madoff is that part of his business was legit. I don't know what kind of annual report he produced but that is something that his investors should've looked at (if he had one).
If you don't ask the questions, you won't get the answers. The Madoff case is question-rich and logic-poor.
Please remember: Madoff admitted his guilt. How many other Madoffs haven't?
Assuming the CPAs gave an unqualified opinion, I wonder how thoroughly the notes to the audited financial statements were read by these so called sophisticated investors? I would imagine the AICPA is working on new FASB's as we await when the other shoe will drop. It's another Arthur Andersen/Enron situation for the accounting profession.