After Madoff, America’s own Ponzi fraud unwinds

Call any Jewish friend these past few days and the degrees of separation from someone financially devastated by Bernie Madoff's $50bn heist are often only one or two. It's not just ruined heiresses in the Palm Beach Country Club now faced with the prospect of dividing the Jellymeat Whiskas can into two equal portions for mistress and cat, it's Jewish academics on Ivy League campuses, Jewish doctors in Santa Monica finding their retirement nest eggs or charitable trusts wiped out overnight.
 
I called up one rich Jewish pal in New York and asked whether I should Fedex him some dry rations. He volunteered cheerfully that because of some intricate family dispute his own money hadn't been parked at Bernard L. Madoff Investment Securities LLC. On the other hand his uncle had woken up the morning after Madoff's arrest to discover that the $40m he'd entrusted to Bernie was gone forever, along with the multi-million pension fund of his workforce, which he'd also entrusted to Madoff.

His fraud ranks as a major ethnic cleansing in 21st-century America

Of course Madoff had clients of every creed and nation, but he made a speciality of trolling for Jewish money. His fraud ranks as a major ethnic cleansing in 21st-century America.
 
How did Madoff, despite widespread suspicions across many years, continue to allure so many investors, smart fellows like Steven Spielberg, well equipped with expert number crunchers?

The most gullible dupes of all are those who preen themselves as being privileged accomplices in a profitable conspiracy, at scant risk to themselves. Many of Madoff's clients were not so naive as to believe he had a virtuous investment model that permitted him to report 10–12 per cent annual returns on capital invested, through boom and bust. They thought Bernie's 'model' took the distinctly unvirtuous form of insider information. Thus did Madoff's prosperous victims fatally miscalculate the dimension of the swindle.
 
On the larger canvas, what exactly separates Madoff's operation from those of the banks rewarded for their shady follies by a $700bn bailout? Just like Madoff, the banks finally had to admit that all their public financial statements were false, that the supposed assets were worthless. Unlike Madoff, who looted his clients of a mere $50bn, they were "too big to fail".
 
The operating assumption of the Ponzi scheme is that the tide will always rise, that old investors can be repaid by the infusions ponied up by the fresh recruits. For the past 20 years the entire American economy has become - to quote Bernie's succinct resume of his business to his sons - "a giant Ponzi scheme", bloating out like the metastasising planet described by Stanislaw Lem in his strange science fiction novel Solaris.
 
Uncle Sam is the biggest Ponzi operator of all. Bernie had to constantly replenish his fund with new deposits. So does Uncle Sam, wheedling more money out of the Chinese, the Indians, the Japanese and poor Third World nations forced to pay up at the point of a gun.
 
But in the end Uncle Sam has one huge asset denied Madoff, who seems to have stopped short of the straightforward forgery allegedly practised by Marc Dreier, the Manhattan lawyer arrested in Canada for trying to sell nonexistent bonds to the tune of $380m.

Uncle Sam has the printing press to run off the necessary dollars. He's certainly going to need lots of fresh new bills. You can set your clock now for the alarms scheduled to go off all the way through Obama-time: credit card debt, commercial real estate implosion, option-ARM financing. Madoff will become the sacrificial symbol of Wall Street thievery Maybe Madoff, trolling for suckers in the Palm Beach Country Club and the Jewish charitable foundations, will become the sacrificial symbol of Wall Street thievery, sent off to the penitentiary in lieu of the real big-timers. I guess the silver lining is that anti-Semitic grumbles about the Jews taking the country to the cleaners can be trumped by pointing out that so many of Madoff's victims are Jewish.
 
Amid the hubbub over the arrest of Governor Rod Blagojevich of Illinois, the New York Times ran a piece on December 14 by Eric Lipton and Raymond Hernandez about Senator Charles Schumer's version of pay-to-play.

Unlike Blago, Schumer moved from talk to action. Amid the bailout negotiations he went to a Democratic Party fundraiser in New York and addressed some 20 of the heaviest Wall Street hitters. The senator "offered some reassurance", wrote the Times reporters. "The businessmen could count on the Democrats to help steer the nation through the financial turmoil... The message clearly resonated. The next week, executives at firms represented at the breakfast sent in more than $135,000 in campaign donations."

Madoff donated $100,000 to the Democrats between 2005 and 2008

Of course, Madoff sent Schumer individual campaign contributions down the years, recycling some of his clients' money for the worthy purpose of choking off any untoward regulatory zeal on the part of New York's senior senator.

Schumer personally received $6,000 from Bernard Madoff since 1998 and $33,000 more from various Madoff family members during that period. Madoff personally donated $100,000 to the Democratic Senatorial Campaign Committee between 2005 and 2008, according to the non-partisan Centre for Responsive Politics. All legal and not even a four-letter word.

Moral: As instruction on how to get through life in one piece, the Madoff affair is proof of the old rule: the more elegant the tailoring, the more handsomely silvered the distinguished locks, the more innocently rubicund the visage, the more likely you are to find a hand covertly fishing for your wallet.   ·