#berniemadoff

Wizard of Lies

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Another film that shoots the lights out. HBO casts DeNiro as Bernie Madoff who plays the role brilliantly. It is a tragic tale. Not just to those that lost $65bn (although one would think if those that made $100s of millions one might expect they’d be a bit better at risk management) to a fraudster but more importantly the suicide of his eldest son and the death from cancer of his younger son before he passed. While one doesn’t feel any sympathy for Madoff it is a well portrayed rendition of how he created his Ponzi scheme and duped the regulators for so long. Madoff turns 80 on April 29.

Madoff wasn’t so long ago

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It was just over 9 years ago that Bernie Madoff pleaded guilty to a Ponzi scheme that cost investors over $65bn. While many happily point fingers at greedy banksters we tend to forget that despite Harry Markopolos, handing the SEC (the US regulator) the details of the case in 1999 on a platter it failed to act. His testimony points directly to the kind of problem that exists with government regulators – no track record in the fields they legislate. In the 9 years prior to Madoff pleading guilty, Markopolos caught him at the $6bn stage. The SEC after multiple investigations turned nothing even with a treasure map provided by Markopolos that someone with markets experience would have discovered in 30 minutes. Throw on all the other scandals (ratings agencies etc) that the SEC failed to capture and it cost taxpayers $700bn.

Willful negligence? I gave a speech at the Japanese financial regulator (FSA) on fraud and insider trading  at the time of the Kobe Steel data scandal. When presented with comparable data with other exchanges the blind eye is no less scandalous. So before hanging the financiers out to dry perhaps people ought to question the regulators whose incompetence and inaction is at fault. If you give a child a box of matches unsupervised then don’t be surprised if the whole house burns down.