Some Madoff Musings
Let me begin this little post by saying that I could not possibly come up with enough epithets to describe how I feel about Mr. Madoff. He is slime, sleaze, scum, etc. I am thrilled beyond words to see him go to jail and it does not bother me in the least to ponder him spending the rest of his life going to the dance with his new roomie Bubba.
I also feel deep empathy for the many victims of his crimes, especially for the older ones who thought they were entering into their golden years but now face the need to go back to work because they are destitute. The suffering of these poor people is something we should all feel the deepest regret over.
Finally, I am incredibly upset at the utter failure of our regulatory agencies in failing to discover this scheme for more than twenty years especially when they were warned by some of the investors that something seemed to be off or questionable in this Ponzi scheme.
Having said all that I do have a bit of a problem with the portrayal of the investors as being completely innocent dupes who hold no responsibility for what happened. I realize that these people were no sophisticated investors but at the same time they were not entirely ignorant. The mere fact that they had fairly large sums of money to invest indicates that they had at least a basic level of education and intelligence.
Taking that into account I would think that they would have wondered about some of the warning signs. Here they have a plan that is providing 10-20% returns every single year for decades on end. Over 90% of the quarters were profitable and in most cases they made far more money than any other investment plans.
So consider that for a moment. No matter what the stock market or economy is doing, you are making money. Every other plan in the country is losing money during bad times but you don’t. Other plans are making modest single digit returns but you are making steady double digit returns while being promised there is no risk.
I would think that this would set off alarm bells in the minds of most people. Ponzi schemes have been around for over 100 years and yet none (or few) of these investors seemed to think anything was wrong.
This does not, of course, excuse Madoff for his crimes. As I said above, I think he deserves to spend several lifetimes in a very small cell and should give up every penny he’s got. It does not mean that I do not feel badly for those who have suffered. But I do think we need to accept that a portion of the blame does lie with those investors who wanted to believe that the free lunch really was real.