Bonfire of the Vanities - it’s the 2008 edition

In time for the Christmas Panto season, the Great Economic Unwinding of 2008 is turning from tragedy to farce. The dark complexity of Bear Stearns and Lehman Brothers is far behind us. Most people have given up trying to understand the details of the $700bn bail-out of America's financial industry. All we are left with now is greed and human grotesquery on an epic scale.

In New York, the Bonfire of the Vanities - 2008 edition - is blazing away. And it makes the excesses of the 1980s described by Tom Wolfe seem quaint.

Last week alone, we learned of two colossal frauds. Bernard Madoff's fleecing of $50bn from investors in his asset management and brokerage businesses. And Marc Dreier, a prominent Manhattan lawyer arrested in Canada for trying to sell non-existent bonds to the tune of $380m.

Many people were suspicious of Madoff. They could not understand how he made such consistent returns

Both men were at the height of their respective careers. They had acquired all the baubles of New Yorkers of a certain ilk: Upper East Side apartments; houses in the Hamptons; country club memberships; non-profit board seats; fully-staffed yachts. Madoff's yacht was called Bull, a reference either to bull markets or bull of some other kind.

They were also classic types, the kind you will inevitably meet if you hang around Manhattan long enough.

Dreier was an aggressive corporate lawyer, educated at Yale and Harvard, who regarded almost any tactic as acceptable provided he won. In a dispute over a piece of beach front property in the Hamptons, he dispatched helicopters and frogmen to take photographs and spook the owners. He hung some $40m of contemporary art in his offices around the world, the usual names beloved of financial world show-offs: Warhol, Richter, Pollock.

Madoff was the genial, wealthy financier, the head of the co-op board at his apartment building, a feature on the charity circuit. He seemed like one of the rocks on which New York society rests - until he didn't.

There must be thousands of New Yorkers who will look in the mirror today and see parts of Dreier and Madoff in their own lives and behavior. They chase the same trophies, status and rewards. And how many of them may have taken a short-cut or two on the way up?

What Dreier and Madoff tell us, more than the collapse of the investment banks, is how deep the greed of the past two decades ran; how corrupting it became, perverting men who could have had very comfortable lives but grabbed at more and more.

The authorities seem to have abandoned even the most basic policing

These were not smart-aleck 27-year-olds who could not understand the risks of contemporary finance because they had never seen a down year. They were not ignorant or inexperienced. Their clients were not fools. They were religious charities, Jewish retirees in Florida, Swiss private banks, billionaire families around the world. Madoff and Dreier exploited an era of financial insanity - and were caught short when it ended.

It was one thing for American regulators to place too much trust in the free markets. To succumb to pressure and under-regulate mortgage brokers, banks, auditors, ratings agencies and investment firms. But they also seem to have abandoned even the most basic policing.

Many people were suspicious of Madoff. They could not understand how he made such consistent returns, around 10 per cent a year in good times or bad. His trading strategy was a mystery. Twice the Securities and Exchange Commission investigated him, in 2005 and 2007, and twice they found nothing.

It took a man with a name ripped straight from a Wolfe novel, Andrew Calamari, to announce the SEC's belated complaint.

The lesson to be drawn from Madoff's and Dreier's downfall is not that of two rotten apples. Nor were these a couple of befuddled geezers lost in the new financial universe. The lesson is that anyone who became insanely rich these past few years providing financial services is now under suspicion. ·