the giant ponzi scheme: Madoff jailed for 150 years - Tilted Forum Project Discussion Community

roachboy · 12-18-2008, 04:50 AM

let us now contemplate bernard madoff's giant ponzi scheme.
but that's not quite as much fun as contemplating the sec's mea culpa issued over madoff's giant ponzi scheme....

Quote:

SEC under pressure over crisis detection

By Joanna Chung and Greg Farrell in New York

Published: December 17 2008 19:10 | Last updated: December 18 2008 02:07

In an extraordinary admission, the head of the Securities and Exchange Commission is blaming his own agency for missing numerous chances to detect what could be the world’s biggest fraud.

Discussing his decision to launch an internal investigation into how the SEC missed an alleged $50bn “Ponzi” scheme run by New York broker Bernard Madoff, Christopher Cox said on Wednesday that “over a period of several years, nearly a decade, credible information was on multiple occasions brought to the agency, and yet at no point taken to the next step.” He added: “We need an answer to these questions.”

But the failure to uncover Mr Madoff’s alleged scheme is only the latest in a string of setbacks for the regulator. The SEC and its chairman – expected to step down in January when the new administration takes office – have come under a storm of criticism for oversight failures amid the financial crisis, raising doubts about the future role and even the existence of the agency.

“The damage here could be irreparable,” said Jacob Frenkel, a former SEC attorney and assistant special prosecutor.

A senior Democratic Congressman, Paul Kanjorski, said on Wednesday that the Madoff scandal has raised “even more troubling questions about the effectiveness of our regulatory system.” A US House of Representatives panel is planning to conduct an inquiry into the failures of the SEC and other regulators in the matter before legislators start work next year in recrafting the regulation of financial services, he said.

The SEC has already stopped overseeing the big investment banks, after Bear Stearns and Lehman Brothers collapsed and the others converted to bank holding companies, supervised by other regulators.

A recent report by the SEC inspector-general said the agency failed to address “numerous, potential red flags” in regulating Bear Stearns.

Now, Mr Cox has ordered the inspector-general to conduct a full examination of the SEC’s past oversight of Mr Madoff and his firm that should include staff contact and relationships with the Madoff family. Mr Cox said the SEC staff failed to get subpoena power to obtain information, instead relying upon information voluntarily produced by Mr Madoff.

Mr Cox said the current investigation – which apparently came to light after Mr Madoff himself admitted to the fraud in court documents – has shown that Mr Madoff kept several sets of books and false documents, and provided false information involving his advisory activities.

The SEC chief did not elaborate on the “credible and specific allegations” that were previously brought to the SEC staff, and he emphasised on Wednesday that there was no evidence “at this point, that any personnel did anything wrong”.

However, the inquiry is likely to put growing pressure on two divisions of the SEC. The enforcement division is responsible for investigating and bringing legal action against potential wrongdoers. But the first line of defence within the agency for such action is the Office of Compliance Inspections and Examinations.

Former SEC chairman Arthur Levitt praised Mr Cox’s decision to launch an internal inquiry. But he lamented the fact that the SEC did not inspect Mr Madoff’s advisory business in 2006, the year in which it was first registered with the commission.

He noted that the unit is chronically understaffed. “They had 433 people in the office of compliance and examinations looking at 8,000 advisers two years ago,” Mr Levitt said. “Today they have 400 people looking at 11,000 advisers and thousands of mutual funds.”

Indeed, former SEC officials have repeatedly pointed to shortage of resources. But they also say that the enforcement division, in particular, has suffered under Mr Cox’s tenure, because of administrative hurdles that limited the staff from moving quickly and aggressively.

Charles Clark, a former SEC enforcement official who led the agency’s investigation into the collapse of Enron, and is now a partner at the law firm of Kirkland & Ellis LLP, said: “Everyone who is scrutinising this situation needs to be tempered in how quickly they make judgments about this matter, which everyone acknowledges is extremely complicated.” However, Ross Albert, a former SEC senior special counsel and assistant US attorney, said the SEC chairman was throwing the agency’s career enforcement staff “under the bus” to deflect blame for his own leadership failures. “The SEC certainly has the resources to handle sophisticated and complex investigations, but the political appointees ... set the SEC’s enforcement agenda.”

Copyright The Financial Times Limited 2008

FT.com / In depth - SEC under pressure over crisis detection

in case you haven't been following this---and admittedly it's almost difficult to follow simply because it seems like madoff is to the financial meltdown what the flying shoe in iraq was to that debacle--the incident inside the incident that sums up much about the incident as a whole---and in a context where you find, even on the nitwit cable "news" shows talking heads who lean into the camera and say "deflation: it's a bad thing"----and so it seems like Everything is Sliding Toward the Crapper--now there's this. so the Everything that is Sliding Toward the Crapper is now taking the time to stage metaphors of itself on the way down.

last thing we want to see really is the baroque.*

apparently bernard madoff told his sons a couple weeks ago maybe, i like to think over thanksgiving dinner, that his investment firm was a giant lie, a ponzi scheme, kinda like the one that max bialstock runs in "the producers" but really fucking big.
the difference is that where max would literally and metaphorically screw old ladies, madoff did it to banks, charities, pension funds, and small investors.

having heard this confession, his sons decided to turn him in. (aside: after watching too much in the way of crappy reality shows, i am curious abotu the oedipal dimension of this action...but that's another matter, one for gossip girls like me.)

and a few days after news of this turn-in and subsequent arrest broke, the mea culpa comes from the sec.

now i find this to be amazing. and there are lots of questions that could be asked about all aspects of this---but at the outset, i'll pose only one and see if things develop.

in yesterday's ny times, thomas friedman, who i generally see as a bit of a putz, did an edito that linked the madoff ponzi scheme to the derivative market as a whole. the basic argument is that there's no particular difference between what madoff was doing and the bundling and selling of negative numbers as a variant of commodity future---at the level of what friedman seems to understand as the fradulent nature of the products themselves---at the level of the collusion between a form of gangster capitalism and the agencies which were supposed to be regulating it---at the level of outcomes. do you agree with this assessment?

in other words, do you see a repetition of the mortgage market implosion in the madoff scheme?

the correlate of this is that madoff's scam surfaces at a particularly bad moment and is functioning as a metaphor for american-style capitalism as a whole. friedman makes this argument by situating himself in hong kong, having a conversation with a banker whose basic claim is that this amounts to a destruction of the ideological construct of america as model which presides over contemporary forms of cowboy/gangster capitalism (take your pick---all that changes are the outfits)...and undermines the legitimacy of the united states as center of an overarching rationality which the us has not hesitated to impose on other countries---because apparently the united states has at the same time exempted itself entirely.

if this is a widely shared view--and looking around the international press yesterday, it is reasonable to see it as widely shared, it follows that the madoff scheme, coming out now, really does intensify the problems facingthe united states by extending what was arguably already a political crisis (following from the variety of actions undertaken by the bush administration in particular) into a political crisis that directly affects the international economic order---in other words, the political crisis is tracking from enabling condition to internal factor.

what do you make of this?
what should the united state do now?

* in the sense that the whole can be explored through the contemplation of details: the whole is the proliferation of details; there is no center except as implied by the proliferation of detail...

Tully Mars · 12-18-2008, 06:01 AM

I think it sucks he's out on bail. He managed to cough up some 20 mil. for that. Some kid steals a grand from the local liquor store and he's in jail waiting for trail with a "no bail" order. This guy's accused of ripping off BILLIONS. The guy took money from charities and children's hospitals from what I read, Let him sit in jail and wait for trail too.

What should the US do about it? Hell if I know. But I'd sure as hell start with seizing every asset he and his family currently holds. If it turns out he didn't do it they can have it back.

Prince · 12-18-2008, 01:48 PM

I'm waiting for the talk of federal bailouts for these executives to begin. That seems to be mantra of 2008.

ASU2003 · 12-18-2008, 03:41 PM

Quote:

Originally Posted by Tully Mars

I think it sucks he's out on bail. He managed to cough up some 20 mil. for that. Some kid steals a grand from the local liquor store and he's in jail waiting for trail with a "no bail" order. This guy's accused of ripping off BILLIONS. The guy took money from charities and children's hospitals from what I read, Let him sit in jail and wait for trail too.

What should the US do about it? Hell if I know. But I'd sure as hell start with seizing every asset he and his family currently holds. If it turns out he didn't do it they can have it back.

I agree. He knew what he was doing, but just hope he didn't get caught. It's no different from any ordinary criminal.

QuasiMondo · 12-19-2008, 06:38 PM

I want to be mad. I want to be furiously steamed. I really do, but I just can't find the gumption to be upset. I couldn't put my finger on why I have this inability to be full of righteous indignation at what Maddoff has done until I saw this simple question asked:

"How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?"

Ponzi Scheme: You give me money, I turn around and get you interest on it. Don't ask me how I do it, that's my little secret.
Investments, such as hedge funds: You give me money, I turn around and get you interest on it. Don't ask me how I do it, that's my little secret.

Is the wealth of the legitimate investors really there? After seeing what happened to Bear Stearns when investors made a run on them, I don't think there's a whole lot of investment companies that are that much different than from what Maddoff ran.

guyy · 12-19-2008, 08:07 PM

Quote:

Originally Posted by roachboy

what do you make of this?
what should the united state do now?

I used to think El Bigote made those little anecdotes up, but just today i overheard a couple Canadians expounding on the immense financial corruption of nuestros Estados Unidos.

I guess the Putzpoint is that any payoffs from derivatives bets have to come from other Players because they are most definitely not coming from any increase in value within the system. In that sense it is like a Ponzi scheme. Now, the difference between Ponzi schemes and things like speculative bubbles seems to be mostly in agency of the schemer and the discourse around the scheme. Some would call it hairsplitting. Like the proverbial blind squirrel, Moustacheputz got something right.

The mode of accumulation during the boom becomes the mechanism of failure in the bust.

What to do?

You mean aside from the immediate aufheben of the commodification of labour?

Well, geez, how about hiring a few more overseers for the SEC out of the ever-swelling ranks of the unemployed? We could just redo the entire structure of New Deal financial regulation that the Reaganites thought sooooo burdensome. Wall Street needs some very tough love. Some bad ass regulatory types might scare those punks straight. Boot camps, weekends in jail before licensing might be a good idea. Dare to discipline!

QuasiMondo · 12-19-2008, 09:03 PM

I say we drag them all before congress and give them a good stern scolding, and grill them on why the flew to DC in private jets and not on commercial flights.

percy · 01-12-2009, 06:23 PM

Quote:

Originally Posted by Tully Mars

I think it sucks he's out on bail. He managed to cough up some 20 mil. for that. Some kid steals a grand from the local liquor store and he's in jail waiting for trail with a "no bail" order. This guy's accused of ripping off BILLIONS. The guy took money from charities and children's hospitals from what I read, Let him sit in jail and wait for trail too.

What should the US do about it? Hell if I know. But I'd sure as hell start with seizing every asset he and his family currently holds. If it turns out he didn't do it they can have it back.

And now instead of incarcerating him, he gets house arrest. Wow,.. the finance industry collapses and no one is to blame, no one gets charged with fraud,.....Spitzer doesn't even get charged for his illegal actions,,..... Phil Spector is charged with murder and gets to go home each day of the trial,...good lord, what the hell is happening to the justice system and why do these people get treated with kid gloves

Cynthetiq · 01-12-2009, 06:54 PM

just absurd really.... totally actually.

ASU2003 · 01-12-2009, 06:54 PM

And he was mailing gems to family members it looks like. Bernie Madoff Hiding Gems From Authorities? | Mark Pasetsky's CoverAwards

The thing is, I'm not sure how many people would act any differently.

There needs to be some serious financial consequences for him and his family. (What if his wife divorces him now, does she get half? Half of what?) It might seem harsh going after people who indirectly benefited, but I think it would keep Wall Street in check if they couldn't hide their money and knew they would hurt spouses and offspring with financial ruin too. They can collect a welfare check just as well as someone who lost their job from the mess he caused.

ottopilot · 02-03-2009, 07:33 PM

"the giant ponzi scheme"

Try Social Security and the new "Stimulus" package. What the Hell, the biggest Ponzi Scheme is our federal government.

samcol · 02-03-2009, 07:59 PM

Quote:

Originally Posted by ottopilot

"the giant ponzi scheme"

Try Social Security and the new "Stimulus" package. What the Hell, the biggest Ponzi Scheme is our federal government.

Exactly, 50 bil makes him sound like a scapegoat when the feds are robbing hundreds of billions to trillions of dollars a year.

This guy is merely taking your eye of the ball.

dc_dux · 02-03-2009, 08:01 PM

Right...who cares that more than 2 million people lost their jobs last year and tens of thousands already this year.....fuck 'em!

The social security "ponzi" scheme...who cares that it provided a better quality of life for hundreds of millions of seniors over the last 75 years....fuck 'em!

It will work itself out if we just leave it alone.

Compassionate conservatism and libertarianism?

samcol · 02-03-2009, 08:04 PM

Quote:

Originally Posted by dc_dux

Right...who cares that more than 2 million people lost their jobs last year and tens of thousands already this year.....fuck 'em.

It will work itself out if we just leave it alone.

You obviously missed the point. No one is saying we should turn a blind eye, but it's just a distraction. I'm not saying this guy shouldn't go to jail, but it's like busting a low level middle man instead of the drug dealer.

The american people want to see someone burn for this economy, I think their attention should be focused on the bigger fish who continue to rob us.

dc_dux · 02-03-2009, 08:06 PM

Quote:

Originally Posted by samcol

You obviously missed the point. No one is saying we should turn a blind eye, but it's just a distraction. I'm not saying this guy shouldn't go to jail, but it's like busting a low level middle man instead of the drug dealer.

The american people want to see someone burn for this economy, I think their attention should be focused on the bigger fish who continue to rob us.

My point was directed more to otto's keen observation:

"the giant ponzi scheme"....Try Social Security and the new "Stimulus" package. What the Hell, the biggest Ponzi Scheme is our federal government.

tisonlyi · 02-03-2009, 08:17 PM

The 'ponzi scheme' was global and the US federal govt, in fact all govts globally are dwarfed by the scale.

A recent measure of derivatives in financial markets had them totalling $860 trillion. That's about 15x gross global production.

The Great Debate Debate Archive U.S. and UK on brink of debt disaster | The Great Debate |

Quote:

January 20th, 2009
U.S. and UK on brink of debt disaster
Post a comment (90)
By: John Kemp
Tags: General, debt, John Kemp, The Great Debate

John Kemp Great Debate-- John Kemp is a Reuters columnist. The opinions expressed are his own. –

The United States and the United Kingdom stand on the brink of the largest debt crisis in history.

While both governments experiment with quantitative easing, bad banks to absorb non-performing loans, and state guarantees to restart bank lending, the only real way out is some combination of widespread corporate default, debt write-downs and inflation to reduce the burden of debt to more manageable levels. Everything else is window-dressing.

To understand the scale of the problem, and why it leaves so few options for policymakers, take a look at Chart 1 (https://customers.reuters.com/d/graphics/USDEBT1.pdf), which shows the growth in the real economy (measured by nominal GDP) and the financial sector (measured by total credit market instruments outstanding) since 1952.

In 1952, the United States was emerging from the Second World War and the conflict in Korea with a strong economy, and fairly low debt, split between a relatively large government debt (amounting to 68 percent of GDP) and a relatively small private sector one (just 60 percent of GDP).

Over the next 23 years, the volume of debt increased, but the rise was broadly in line with growth in the rest of the economy, so the overall ratio of total debts to GDP changed little, from 128 percent in 1952 to 155 percent in 1975.

The only real change was in the composition. Private debts increased (7.8 times) more rapidly than public ones (1.5 times). As a result, there was a marked shift in the debt stock from public debt (just 37 percent of GDP in 1975) towards private sector obligations (117 percent). But this was not unusual. It should be seen as a return to more normal patterns of debt issuance after the wartime period in which the government commandeered resources for the war effort and rationed borrowing by the private sector.

From the 1970s onward, however, the economy has undergone two profound structural shifts. First, the economy as a whole has become much more indebted. Output rose eight times between 1975 and 2007. But the total volume of debt rose a staggering 20 times, more than twice as fast. The total debt-to-GDP ratio surged from 155 percent to 355 percent.

Second, almost all this extra debt has come from the private sector. Take a look at Chart 2 (https://customers.reuters.com/d/graphics/USDEBT2.pdf). Despite acres of newsprint devoted to the federal budget deficit over the last thirty years, public debt at all levels has risen only 11.5 times since 1975. This is slightly faster than the eight-fold increase in nominal GDP over the same period, but government debt has still only risen from 37 percent of GDP to 52 percent.

Instead, the real debt explosion has come from the private sector. Private debt outstanding has risen an enormous 22 times, three times faster than the economy as a whole, and fast enough to take the ratio of private debt to GDP from 117 percent to 303 percent in a little over thirty years.

For the most part, policymakers have been comfortable with rising private debt levels. Officials have cited a wide range of reasons why the economy can safely operate with much higher levels of debt than before, including improvements in macroeconomic management that have muted the business cycle and led to lower inflation and interest rates. But there is a suspicion that tolerance for private rather than public sector debt simply reflected an ideological preference.

THE DEBT MOUNTAIN

The data in Table 1 (https://customers.reuters.com/d/graphics/USDEBT3.pdf) makes clear the rise in private sector debt had become unsustainable. In the 1960s and 1970s, total debt was rising at roughly the same rate as nominal GDP. By 2000-2007, total debt was rising almost twice as fast as output, with the rapid issuance all coming from the private sector, as well as state and local governments.

This created a dangerous interdependence between GDP growth (which could only be sustained by massive borrowing and rapid increases in the volume of debt) and the debt stock (which could only be serviced if the economy continued its swift and uninterrupted expansion).

The resulting debt was only sustainable so long as economic conditions remained extremely favorable. The sheer volume of private-sector obligations the economy was carrying implied an increasing vulnerability to any shock that changed the terms on which financing was available, or altered the underlying GDP cash flows.

The proximate trigger of the debt crisis was the deterioration in lending standards and rise in default rates on subprime mortgage loans. But the widening divergence revealed in the charts suggests a crisis had become inevitable sooner or later. If not subprime lending, there would have been some other trigger.

WRONGHEADED POLICIES

The charts strongly suggest the necessary condition for resolving the debt crisis is a reduction in the outstanding volume of debt, an increase in nominal GDP, or some combination of the two, to reduce the debt-to-GDP ratio to a more sustainable level.

From this perspective, it is clear many of the existing policies being pursued in the United States and the United Kingdom will not resolve the crisis because they do not lower the debt ratio.

In particular, having governments buy distressed assets from the banks, or provide loan guarantees, is not an effective solution. It does not reduce the volume of debt, or force recognition of losses. It merely re-denominates private sector obligations to be met by households and firms as public ones to be met by the taxpayer.

This type of debt swap would make sense if the problem was liquidity rather than solvency. But in current circumstances, taxpayers are being asked to shoulder some or all of the cost of defaults, rather than provide a temporarily liquidity bridge.

In some ways, government is better placed to absorb losses than individual banks and investors, because it can spread them across a larger base of taxpayers. But in the current crisis, the volume of debts that potentially need to be refinanced is so large it will stretch even the tax and debt-raising resources of the state, and risks crowding out other spending.

Trying to cut debt by reducing consumption and investment, lowering wages, boosting saving and paying down debt out of current income is unlikely to be effective either. The resulting retrenchment would lead to sharp falls in both real output and the price level, depressing nominal GDP. Government retrenchment simply intensified the depression during the early 1930s. Private sector retrenchment and wage cuts will do the same in the 2000s.

BANKRUPTCY OR INFLATION

The solution must be some combination of policies to reduce the level of debt or raise nominal GDP. The simplest way to reduce debt is through bankruptcy, in which some or all of debts are deemed unrecoverable and are simply extinguished, ceasing to exist.

Bankruptcy would ensure the cost of resolving the debt crisis falls where it belongs. Investor portfolios and pension funds would take a severe but one-time hit. Healthy businesses would survive, minus the encumbrance of debt.

But widespread bankruptcies are probably socially and politically unacceptable. The alternative is some mechanism for refinancing debt on terms which are more favorable to borrowers (replacing short term debt at higher rates with longer-dated paper at lower ones).

The final option is to raise nominal GDP so it becomes easier to finance debt payments from augmented cashflow. But counter-cyclical policies to sustain GDP will not be enough. Governments in both the United States and the United Kingdom need to raise nominal GDP and debt-service capacity, not simply sustain it.

There is not much government can do to accelerate the real rate of growth. The remaining option is to tolerate, even encourage, a faster rate of inflation to improve debt-service capacity. Even more than debt nationalisation, inflation is the ultimate way to spread the costs of debt workout across the
widest possible section of the population.

The need to work down real debt and boost cash flow provides the motive, while the massive liquidity injections into the financial system provide the means. The stage is set for a long period of slow growth as debts are worked down and a rise in inflation in the medium term.

Stoking up inflation will fire an effective sovereign default.

Basically, all the options open, in the end, amount to default, inflationary/devaluation default, bankruptcy or jubilee.

Choose your victims:

Lenders
Borrowers
Shareholders
All of the above.

(Tax payers aren't an option, the scale is too big.)

And, though this clearly points towards a ponzi scheme of sorts, it may be in the wrong thread?

ottopilot · 02-04-2009, 08:41 PM

Quote:

Originally Posted by dc_dux

My point was directed more to otto's keen observation:

"the giant ponzi scheme"....Try Social Security and the new "Stimulus" package. What the Hell, the biggest Ponzi Scheme is our federal government.

I thought it was more swell than keen, bordering on neato.

The point was how they've been managed, not a knock on the good they've done. sheesh.

Tully Mars · 02-05-2009, 02:45 AM

Quote:

Originally Posted by Cynthetiq

just absurd really.... totally actually.

I agree it's nuts. Can you image what would happen if the Feds thought you were making a ton of cash illegally? Let's say drugs. You think they come into you home and strap an ankle bracelet on you and tell you to stay home until trail? Hell no! They seize the house as property obtained through illegal actions and all the asset of yours they could find and call it evidence. Of course if you could get an attorney to prove you earned the funds legitimately you could get they back, might even let you move back into the home someday.

roachboy · 02-05-2009, 07:36 AM

i caught a bit of markopolos' testimony on c-span. he presents an interesting case, both in terms of information and in himself as a delivery system---the former is quite damning and the indictment of the entire sec that followed from it seems accurate and justified--the bottom line is that the sec is entirely in bed with the industries they are supposed to regulate and that for there to be coherent regulation there has to be a purge of the upper management of the sec and a fundamental shift in orientation. the picture that emerges is of a regulatory body made over in the republican image of a regulatory body--staffed with incompetents, corrupt fundamentally, unwilling and unable to carry out it's function.

at the same time, markopolos comes across as being extremely tightly wrapped, teetering on the edge of paranoia by disposition, the sort of person whose delivery is its message's worst enemy.

this following provides a watered-down summary of the proceedings:

Quote:

At Madoff Hearing, Lawmakers Lay Into S.E.C.
By DIANA B. HENRIQUES

WASHINGTON — Securities regulators could not cool the white-hot Congressional fury on Wednesday over their failure to act on tips that might have exposed the Madoff scandal almost a decade ago.

At a contentious hearing by a House Financial Services subcommittee, Harry Markopolos, a private fraud investigator from Boston, detailed his persistent but futile efforts to spur the Securities and Exchange Commission to investigate Bernard L. Madoff, going back to 1999.

Mr. Madoff was arrested in December and charged with running a giant Ponzi scheme — the very accusation Mr. Markopolos said he made repeatedly to S.E.C. employees in Boston and New York to no avail.

Lawmakers spent the rest of the hearing in a heated dialogue with senior S.E.C. staff members, getting little satisfaction and suggesting the agency was the problem.

In the torrent of criticism that Mr. Markopolos and lawmakers heaped on the S.E.C. and its senior staff members, some complaints were serious — that the agency lacked the expertise to tackle major frauds by big players and had no systematic way of dealing with whistle-blowers. Others were sarcastic, with Mr. Markopolos saying regulators seated in Fenway Park in Boston would have trouble finding first base.

The agency’s officials repeatedly tried to explain that they could not discuss the handling of the Madoff case without jeopardizing that pending investigation — and were repeatedly cut off by lawmakers who demanded specific information about the handling of the case.

Representative Paul E. Kanjorski, Democrat of Pennsylvania and the hearing chairman, criticized the official position as an expression of arrogance that he said was at the root of the agency’s regulatory failures.

Congress is in the midst of creating regulatory changes that could change the agency’s fate, Mr. Kanjorski warned the panel of official witnesses. Lawmakers want immediate candor about the handling of the Madoff matter, not generalities, he said.

But the hearing became a collision of frustrations that, at one point, prompted Mr. Kanjorski to accuse the staff members of refusing to cooperate with a branch of government that could wipe their entire agency off the regulatory map, if necessary.

Representative Gary L. Ackerman, Democrat of New York, was more blunt in his condemnation of the S.E.C. officials sitting before him: “We thought the enemy was Mr. Madoff. I think it is you.”

Mary L. Schapiro, the new chairwoman of the S.E.C., later released a letter to the subcommittee’s senior members, conceding that the hearing “cannot have been satisfactory for you.” She asked to meet with them promptly to work out “a course forward” that would both provide accountability and maintain the integrity of continuing investigations.

“There needs to be a full accounting, both of Mr. Madoff’s activities and why we did not detect the fraud, which we truly regret,” she said.

The hearing had opened with Mr. Markopolos telling the panel he had discovered another possible fraud, a $1 billion Ponzi scheme, that he would report to regulators on Thursday. Neither he nor his lawyers would provide any additional details.

Mr. Markopolos also said he would tell regulators about a dozen private foreign funds — which he said were “hiding in the weeds” in Europe — that raised money for Mr. Madoff and had sustained major losses.

These funds have not yet been publicly identified, he said. And their silent victims most likely include investors of “dirty money,” including Russian mobsters and Latin American drug cartels, he said — although he acknowledged that he did not have specific information about such investments.

A lawyer for Mr. Markopolos said later that his client would make his reports to the S.E.C. inspector general, with whom he will meet on Thursday, and “through other channels.”

Linda Chatman Thomsen, the S.E.C. enforcement director, told lawmakers that the agency staff had demonstrated its willingness and ability to pursue major fraud cases, including 70 Ponzi schemes. Still, it missed opportunities to zero in on Mr. Madoff, who was arrested Dec. 11 at his New York apartment and charged with operating a Ponzi scheme whose losses he put as high as $50 billion, according to the civil and criminal complaints against him.

Ms. Thomsen said the agency, under Ms. Schapiro, would work hard to improve its receptiveness and responsiveness to whistle-blowers like Mr. Markopolos. But her responses did not seem to satisfy any of the half-dozen lawmakers who stayed at the hearing after Mr. Markopolos left.

They had been far more riveted by Mr. Markopolos’s testimony, which at times seemed to enter verbal territory more often explored at organized crime hearings. He referred to his fear that he would be killed if Mr. Madoff learned of his investigation. At one point, noting his experience in military intelligence, he described an offer he made to “go undercover” for the S.E.C. — a proposal that was rebuffed.

And he recalled wearing gloves as he assembled a package of information he planned to slip to Eliot Spitzer, when he was New York’s attorney general, so he would leave no fingerprints.

While one lawmaker asked whether this all wasn’t “a little paranoid,” others agreed that Mr. Markopolos was wise to be cautious, given the scale of the fraud he was trying to bring to light.

http://www.nytimes.com/2009/02/05/bu...f.html?_r=1&em

Baraka_Guru · 06-29-2009, 08:00 AM

Quote:

Madoff jailed 150 years for ‘massive' fraud

Tom Hays and Larry Neumeister

NEW YORK — The Associated Press Last updated on Monday, Jun. 29, 2009 11:54AM EDT

Bernard Madoff has been sentenced to the maximum 150 years in prison for his multibillion-dollar fraud scheme.

U.S. District Judge Denny Chin handed down the sentence in New York on Monday.

Defense attorneys had sought 12 years, while prosecutors wanted the maximum. The U.S. federal probation department had recommended 50 years.

Judge Chin called the fraud “staggering” and noted that it spanned more than 20 years. He says “the breach of trust was massive.”

The 71-year-old former Nasdaq chairman pleaded guilty to securities fraud and other charges in March and has been jailed since.

Victims who lost millions of dollars in the multibillion-dollar fraud perpetrated by Mr. Madoff described their ruined lives Monday to the judge sentencing the 71-year-old former Nasdaq stock market chairman.

Mr. Madoff, wearing a dark suit, white shirt and a tie, sat and listened as emotional witnesses described how he spoiled their security, and they urged U.S. District Judge Denny Chin to send him to prison for life.

“Life has been a living hell. It feels like the nightmare we can't wake from,” said Carla Hirshhorn.

“He stole from the rich. He stole from the poor. He stole from the in between. He had no values,” said Tom Fitzmaurice. “He cheated his victims out of their money so he and his wife Ruth could live a life of luxury beyond belief.”

Dominic Ambrosino called it an “indescribably heinous crime” and urged a long prison sentence so “will know he is imprisoned in much the same way he imprisoned us and others.”

He added: “In a sense, I would like somebody in the court today to tell me how long is my sentence.”

Madoff jailed 150 years for ‘massive' fraud - The Globe and Mail

loquitur · 06-29-2009, 02:40 PM

Quote:

Originally Posted by roachboy

the bottom line is that the sec is entirely in bed with the industries they are supposed to regulate

Quite common for this to happen. No one has a greater interest in influencing the regulators than the groups being regulated. As you probably know, for big players regulation is often a way of getting govt protection.

My friends who used to work at the SEC, in various capacities, now use that experience to make a living.

percy · 06-30-2009, 03:15 PM

I'm glad he got 150 years. Now I wish they would find all the rest of the people involved. Just hope he doesn't get out in 2 1/2 years for good behaviour,....or because he isn't accustomed to prison life. Probably will be in a high end lock up in 6 months waiting for parole.

elise1 · 07-01-2009, 06:48 PM

most of these wall street pricks do what madoff does, it just that alot of them don't get caught

Baraka_Guru · 07-01-2009, 06:58 PM

"Most"? I doubt it. Despite what we might like to think, Wall Street itself is not a giant Ponzi scheme.

Tully Mars · 07-01-2009, 07:08 PM

Are you sure?

Baraka_Guru · 07-01-2009, 07:19 PM

There are people who make real money there and they have never even seen Wall Street.

elise1 · 07-01-2009, 07:36 PM

the next guy to go down is Allen Stanford.

Tully Mars · 07-01-2009, 08:17 PM

Quote:

Originally Posted by Baraka_Guru

There are people who make real money there and they have never even seen Wall Street.

I know. Just seems like it used to be I'd buy something with the idea that it had value. I buy it thinking the dividends and earnings would pay off over time. Now I spend time, like right now, scanning to find what bio-med stock just got the FDA's AOK for their latest and greatest cure all or what energy stock is being hyped by Motely or Marketwatch et el. I figure out which ones I want to buy. I hold them until I make a few points then dump them before everyone else realizes it's all hype or the cure all does more damage then good and is recalled. I use to buy stocks that I planed on holding for at least a year (US tax thing) in the last six months or so that's completely changed. Now I buy and sell as soon as I see profit. I've bought and sold the same stock in less then 40 minutes. Actually Monday I think I broke the 30min. barrier.

I have no idea what my accountant is going to say at the end of the year. But this is the only way I can figure out how to make money in this market.

Baraka_Guru · 07-01-2009, 08:21 PM

So what you're saying is you aren't a value investor.

Tully Mars · 07-01-2009, 08:25 PM

I have a few things that I hold. But mostly they pump and I jump and dump.

loquitur · 07-02-2009, 05:31 AM

Oy. Tully, I get cold calls constantly. Mostly I tell them, as politely as possible, no thank you. The ones that are really persistent and insist on mistaking politeness for indecision end up having me hang up on them. These shitheads can only make money if people listen to them; they''re not invincible. Stick with someone reputable and don't try to make a killing overnight, and you'll do just fine. The miracle of compounding really does work.

Baraka_Guru · 07-02-2009, 05:34 AM

Quote:

Originally Posted by loquitur

The miracle of compounding really does work.

Especially when it's working against you, where you can't just "turn it off."

Tully Mars · 07-03-2009, 07:21 AM

Quote:

Originally Posted by loquitur

Oy. Tully, I get cold calls constantly. Mostly I tell them, as politely as possible, no thank you. The ones that are really persistent and insist on mistaking politeness for indecision end up having me hang up on them. These shitheads can only make money if people listen to them; they''re not invincible. Stick with someone reputable and don't try to make a killing overnight, and you'll do just fine. The miracle of compounding really does work.

No one calls me and most stock advice ends up going to the junk folder before I ever see it.

I keep my eye out for stories about the latest greatest stock or company. I buy it right before close or just at open then sell it after the bump. For me this has been working very well. Thursday was a very nice day. Weds. eve I bought a stock for a little over a buck a share. Thursday morning it shot to 1.59 within an hour. I managed to get out at 1.52. Last I saw it it was around 1.30. That was unusably lucky and made my month. Most of the time I manage to get 0.5-3% and I'm happy. Some days I win, some I lose. Last week I bought a stock and couldn't get rid of it until I lost 8%. But so far I'm winning way more then I'm losing. I think the key is not to get greedy and try to hit the absolute peak. Just make a profit, roll it over into my retirement account and head to the beach.

12-18-2008, 06:01 AM	#2 (permalink)
Tully Mars Living in a Warmer Insanity Super Moderator Location: Yucatan, Mexico	I think it sucks he's out on bail. He managed to cough up some 20 mil. for that. Some kid steals a grand from the local liquor store and he's in jail waiting for trail with a "no bail" order. This guy's accused of ripping off BILLIONS. The guy took money from charities and children's hospitals from what I read, Let him sit in jail and wait for trail too. What should the US do about it? Hell if I know. But I'd sure as hell start with seizing every asset he and his family currently holds. If it turns out he didn't do it they can have it back. __________________ I used to drink to drown my sorrows, but the damned things have learned how to swim- Frida Kahlo Vice President Starkizzer Fan Club

12-18-2008, 01:48 PM	#3 (permalink)
Prince /nɑndəsˈkrɪpt/ Location: LV-426	I'm waiting for the talk of federal bailouts for these executives to begin. That seems to be mantra of 2008. __________________ Who is John Galt?

12-19-2008, 06:38 PM	#5 (permalink)
QuasiMondo Wise-ass Latino Location: Pretoria (Tshwane), RSA	I want to be mad. I want to be furiously steamed. I really do, but I just can't find the gumption to be upset. I couldn't put my finger on why I have this inability to be full of righteous indignation at what Maddoff has done until I saw this simple question asked: "How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?" Ponzi Scheme: You give me money, I turn around and get you interest on it. Don't ask me how I do it, that's my little secret. Investments, such as hedge funds: You give me money, I turn around and get you interest on it. Don't ask me how I do it, that's my little secret. Is the wealth of the legitimate investors really there? After seeing what happened to Bear Stearns when investors made a run on them, I don't think there's a whole lot of investment companies that are that much different than from what Maddoff ran. __________________ Cameron originally envisioned the Terminator as a small, unremarkable man, giving it the ability to blend in more easily. As a result, his first choice for the part was Lance Henriksen. O. J. Simpson was on the shortlist but Cameron did not think that such a nice guy could be a ruthless killer. -From the Collector's Edition DVD of The Terminator

12-19-2008, 09:03 PM	#7 (permalink)
QuasiMondo Wise-ass Latino Location: Pretoria (Tshwane), RSA	I say we drag them all before congress and give them a good stern scolding, and grill them on why the flew to DC in private jets and not on commercial flights. __________________ Cameron originally envisioned the Terminator as a small, unremarkable man, giving it the ability to blend in more easily. As a result, his first choice for the part was Lance Henriksen. O. J. Simpson was on the shortlist but Cameron did not think that such a nice guy could be a ruthless killer. -From the Collector's Edition DVD of The Terminator

01-12-2009, 06:54 PM	#9 (permalink)
Cynthetiq Tilted Cat Head Administrator Location: Manhattan, NY	just absurd really.... totally actually. __________________ I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not. What's the best nation in the world? DO-NATION!

01-12-2009, 06:54 PM	#10 (permalink)
ASU2003 immoral minority Location: Back in Ohio	And he was mailing gems to family members it looks like. Bernie Madoff Hiding Gems From Authorities? \| Mark Pasetsky's CoverAwards The thing is, I'm not sure how many people would act any differently. There needs to be some serious financial consequences for him and his family. (What if his wife divorces him now, does she get half? Half of what?) It might seem harsh going after people who indirectly benefited, but I think it would keep Wall Street in check if they couldn't hide their money and knew they would hurt spouses and offspring with financial ruin too. They can collect a welfare check just as well as someone who lost their job from the mess he caused.

02-03-2009, 07:33 PM	#11 (permalink)
ottopilot let me be clear Location: Waddy Peytona	"the giant ponzi scheme" Try Social Security and the new "Stimulus" package. What the Hell, the biggest Ponzi Scheme is our federal government. __________________ "It rubs the lotion on Buffy, Jodi and Mr. French's skin" - Uncle Bill from Buffalo

02-03-2009, 08:01 PM	#13 (permalink)
dc_dux Location: Washington DC	Right...who cares that more than 2 million people lost their jobs last year and tens of thousands already this year.....fuck 'em! The social security "ponzi" scheme...who cares that it provided a better quality of life for hundreds of millions of seniors over the last 75 years....fuck 'em! It will work itself out if we just leave it alone. Compassionate conservatism and libertarianism? __________________ "The perfect is the enemy of the good." ~ Voltaire Last edited by dc_dux; 02-03-2009 at 08:04 PM..

06-30-2009, 03:15 PM	#22 (permalink)
percy Addict	I'm glad he got 150 years. Now I wish they would find all the rest of the people involved. Just hope he doesn't get out in 2 1/2 years for good behaviour,....or because he isn't accustomed to prison life. Probably will be in a high end lock up in 6 months waiting for parole.

07-01-2009, 06:48 PM	#23 (permalink)
elise1 Upright	most of these wall street pricks do what madoff does, it just that alot of them don't get caught

07-01-2009, 06:58 PM	#24 (permalink)
Baraka_Guru warrior bodhisattva Super Moderator Location: East-central Canada	"Most"? I doubt it. Despite what we might like to think, Wall Street itself is not a giant Ponzi scheme. __________________ Knowing that death is certain and that the time of death is uncertain, what's the most important thing? —Bhikkhuni Pema Chödrön Humankind cannot bear very much reality. —From "Burnt Norton," Four Quartets (1936), T. S. Eliot

07-01-2009, 07:08 PM	#25 (permalink)
Tully Mars Living in a Warmer Insanity Super Moderator Location: Yucatan, Mexico	Are you sure? __________________ I used to drink to drown my sorrows, but the damned things have learned how to swim- Frida Kahlo Vice President Starkizzer Fan Club

07-01-2009, 07:19 PM	#26 (permalink)
Baraka_Guru warrior bodhisattva Super Moderator Location: East-central Canada	There are people who make real money there and they have never even seen Wall Street. __________________ Knowing that death is certain and that the time of death is uncertain, what's the most important thing? —Bhikkhuni Pema Chödrön Humankind cannot bear very much reality. —From "Burnt Norton," Four Quartets (1936), T. S. Eliot

07-01-2009, 07:36 PM	#27 (permalink)
elise1 Upright	the next guy to go down is Allen Stanford.

07-01-2009, 08:21 PM	#29 (permalink)
Baraka_Guru warrior bodhisattva Super Moderator Location: East-central Canada	So what you're saying is you aren't a value investor. __________________ Knowing that death is certain and that the time of death is uncertain, what's the most important thing? —Bhikkhuni Pema Chödrön Humankind cannot bear very much reality. —From "Burnt Norton," Four Quartets (1936), T. S. Eliot

07-01-2009, 08:25 PM	#30 (permalink)
Tully Mars Living in a Warmer Insanity Super Moderator Location: Yucatan, Mexico	I have a few things that I hold. But mostly they pump and I jump and dump. __________________ I used to drink to drown my sorrows, but the damned things have learned how to swim- Frida Kahlo Vice President Starkizzer Fan Club

07-02-2009, 05:31 AM	#31 (permalink)
loquitur Junkie Location: NYC	Oy. Tully, I get cold calls constantly. Mostly I tell them, as politely as possible, no thank you. The ones that are really persistent and insist on mistaking politeness for indecision end up having me hang up on them. These shitheads can only make money if people listen to them; they''re not invincible. Stick with someone reputable and don't try to make a killing overnight, and you'll do just fine. The miracle of compounding really does work.