17 December 2008

Madoff: "House Arrest" for $50,000,000,000 Crime

Bernard Madoff, the man accused of perpetrating a Ponzi scheme to the tune of fifty billion dollars, is under house arrest tonight in New York, after posting a $10,000,000 bond. Over the protests of prosecutors who consider him a flight risk, Madoff is allowed, indeed obliged to remain in his $7,000,000 apartment while the government contemplates its next move against him. This story has the basics, but I learn from other sources that "house arrest" really means a curfew; Madoff has to stay home only between the hours of 7:00 p.m. and 9:00 a.m. If he dares flee, he forfeits two other residences, so consider him deterred!

Actually, I imagine Madoff is less a flight risk than a sudden death risk a la Kenneth Lay, who conveniently dropped dead before having to report to prison. In my more suspicious moments I suspect that Lay took General Rommel's way out of his reckoning with justice, and under the present circumstances I wouldn't rule out Madoff offing himself. In the past that would be the last honorable thing he could do. I'd almost say that's the best option, except that I'd like to see him face his accusers and account for his alleged offenses. Even more than that, I'd like to see a merciless investigation of the SEC. Recent reports suggest that clues to Madoff's doings were apparent as early as 1999, but were ignored by the commission. But was it ignorance or someone's notion of "benign neglect?" Were some people letting their pal Madoff get away with stuff. or were they honestly clueless about what he supposedly was up to? Somebody better find out.

The really appalling part of this story is that Ponzi schemes or pyramid schemes keep on happening, and people keep on falling for them. Laws are no deterrent here, apparently. Maybe there's something in the nature of "the market" that makes these schemes natural phenomena. Whether the activity is legal or illegal, the greedy smarts are always going to exploit the greedy stupids. One economist asserts that a market player could invest in a Ponzi scheme and still be acting "rationally," at least by market standards -- as long as he goes in with his eyes open and in the expectation that the government will bail him out. Meanwhile, reading through the list of Ponzi schemes since Charles Ponzi's own time is a demoralizing experience. It must be an irrepressible temptation to try it in the market environment. Some will say that the remedy is smarter investors, but if the market isn't going to institute an intelligence test, someone will have to impose another remedy on it, whether free enterprise likes it or not. The existing laws obvious aren't cutting it. Fortunately, the public is probably in the mood for new laws. Let's hope that feeling lasts.

4 comments:

The Crime Think Collective said...

And my guess is that because of his wealth, status and age, even if he is found guilty, he'll walk with probation. Again, it seems the best course of action is for some vigilante to walk up to him on the street and put a bullet or six in him. And stack the jury with victims of Madoff's ponzi scheme.

Samuel Wilson said...

The vigilante ought to wait until Madoff is convicted, of course. Meanwhile, no defense attorney worth his fee, and probably no judge, would allow anyone who could be considered a victim to sit in judgment on the man. The crucial question whenever you discuss plans like this is when and how you become sufficiently convinced of someone's guilt to justify the rough justice you propose. Do you go with a gut feeling or do you give due process a chance first?

hobbyfan said...

They've sent guys Madoff's age up the river (i.e. OJ), so prison isn't a problem----unless someone there was a previous victim.....

The Crime Think Collective said...

I think in a case like this, just as with Enron, it is blatantly apparent at the outset. And in a case like this, I think putting his victims on the jury would serve the interests of justice. This country has a loooooong history of allowing those with wealth and privilege to walk all over those without. There more I see it happening, the more I become convinced that the best solution is for the aggressor to forcibly become the victim. The bloodier the outcome, the more likely it will be that others will learn the lesson.