Are Madoff's alleged crimes the financial equivalent of murder? TARP = ?

[WhiskeyGirl]

...3,000 readers who wrote in response to my recent column said hanging is too good for Bernard Madoff.

I wonder how many total responses there were?

Madoff is the alleged mastermind of a $50 billion Ponzi scheme that left thousands of investors and many charitable foundations penniless. The dollar value of the crime is equal to three full years' worth of all crimes against property in America - every larceny, burglary, and auto theft. It boggles the mind.

Wow.

...I simply can't print some of the suggested punishments. They are too violent. Imprisonment at Guantanamo or Abu Ghraib was mentioned frequently.

I believe we're at the beginning of something as powerful as the civil rights movement or the protests against the Vietnam War. Many readers made the leap from a criminal Ponzi scheme to the equivalent by government. Reader B.E. suggested that Congress easily topped the $50 billion fraud annually, by putting IOUs in the Social Security trust fund and spending the surplus employment tax receipts.

Will anyone in government 'fix' the problem with all these bailouts?  The bailouts?  Who is going to pay for all this?  What are the chances?  Was reform made to Fannie and Freddie in 2005?  Why not?  Same people now in charge--anything likely to get better in the months to come?

Enforced poverty may be the new punishment. Few readers felt that conventional white-collar imprisonment was appropriate for a crime this large. People are looking for something tougher and more visceral...Reader L.B., for instance, wrote that white-collar criminals should be forced to learn what real poverty means. She suggested cleaning toilets at a homeless shelter, for life.

Will any of these people ever live in povery?  Without funds for survival?  Any of them depend on Social Security?

We may soon have a financial "equivalency" for murder. People feel it isn't right a man can get five or 10 years in prison for robbing a 7-Eleven, when a white-collar crime can be more devastating to more people, but get a lighter sentence. As reader G.C. wrote: "You can kill someone in one of three ways: physically, emotionally, or financially. But only one is punishable by death."

I think about TARP, and all the past and future bailouts.  How does any one pay for robbing future generations of their opportunity?  How does anyone pay for forcing future generations into debt bondage?

We'll be a long time figuring out the equivalences, but if employers can talk in terms of "full-time equivalents" for jobs, it isn't far-fetched to imagine that white-collar crime may soon be seen as a new form of mass murder.

Some will think this is an extreme statement, so let me explain. The highest figure I could find for the value of a human life was the average amount paid to families that suffered a loss from the 9/11 terrorist attacks, $3.1 million. Yet even using this gigantic figure, the $50 billion fraud is the financial equivalent of destroying 16,100 lives.

I'm not a fan of the death penalty. As I wrote a few years ago, I think we need to buy Devil's Island from the French.

How many lives are being destroyed by TARP?  The Obama bailout?  All the past bailouts?  The empty Social Security Trust Fund? 

Who polices Congress and the President?  Maybe Congress polices itself? 

When will Capitol Hill start including "truth in spending" information for all these bailouts?  Nothing left for future generations.

http://www.boston.com/business/articles/2009/01/16/are_madoffs_alleged_crimes_the_financial_equivalent_of_murder_many_think_so/

jmho

[WhiskeyGirl]

When problems were identified in Fannie / Freddie years ago, prior to 2005, why wasn't something done?  Why did so many look the other way?  Where were the watch dogs on Capitol Hill?  Was a financial meltdown of the nation part of the plan?

Did Madoff have any accounting firm auditing the books?  US government regulator?

"Madoff ‘Feeder Funds’ Said to Be Probed by U.K. FSA"

The Financial Services Authority is looking at how U.K. regulated firms were involved in what Madoff allegedly said was a “giant Ponzi scheme,” the people said on condition of anonymity because the subject of the probe isn’t public. The London-based FSA is also reviewing the role of custodian banks, the people said.

Feeder funds took money from investors and placed it with Madoff’s Bernard L. Madoff Investment Securities LLC. The U.K. Serious Fraud Office said last week it’s investigating Madoff’s U.K. operations, which managed his family’s personal funds.

“The FSA’s task is to look after its own backyard but also to help with the Americans’ backyard,” said Tony Woodcock, a regulatory lawyer at London-based Stephenson Harwood. “While the FSA will probably be looking at civil proceedings, ultimately if a U.S. offense has been committed on British soil, there could be an extradition.”

Madoff, 70, was arrested in New York last month after allegedly confessing to the fraud. So-called Ponzi schemes pay early investors with money from subsequent participants. The financier faces as much as 20 years in prison and a $5 million fine if convicted. He hasn’t formally responded to the charges or entered a plea.

What are the chances that he will be charged in todays environment on Capitol Hill?  Did he commit a crime?  Will are the chances that he will be convicted of any wrongdoing?  Where were the watchdogs?  Maybe those watchdogs were eliminated by past presidents and are likely to remain MIA?  What are the chances that the new administration will take financial security seriously?  Tackle fraud?  Waste?  Wrongdoing?  Pay down the deficit?  Put the nation on the road to financial success?   

imho - not likely that anything will be done to make the future better for generations - need change for that!!!   

Just spend, spend, spend, and leave the unfunded tax burden or economic devastation for future generations...

http://www.bloomberg.com/apps/news?pid=20601102&sid=a1fv_Hp6vMwc&refer=uk

I wonder how many nations may want a piece of Madoff?

[WhiskeyGirl]

Ponzi schemes abound

Friday, January 16, 2009
BY MARTIN TUCHMANT

...in a Ponzi scheme, the new money coming in is used to pay off the older stakeholders, but this is not necessarily true.

The money is being distributed to all stakeholders. For example, if there is a pile of surplus cash available one month and no new money comes in that particular month, a "distribution" can still be made. What really happens is a "return of capital," rather than a distribution of a dividend from earnings generated from the enterprise. The problem with this model is that it is not sustainable.

How many companies in corporate America have similar situations?

Look at companies distributing cash in the form of "dividends" that are greater than their earnings. Some even tout the positive aspect of this, claiming the stakeholders need not pay taxes on the distribution, or a portion thereof.

All banks paying dividends that are reporting losses are really operating a similar scheme...

...Other than using buzz-words such as "transparency" to hide behind, these companies are executing, economically, the same activity: distributing funds from a pool of assets belonging to the stakeholders themselves, to the very same stakeholders, without creating new wealth.

I wonder if this is what the Fed is doing with all these bailouts.  Spending money, going into debt, without creating new wealth.  Is it the job of government to create wealth?

For the past several years, companies have been operating a simple variation of a Ponzi scheme: paying out that which was not really created. The reason it has morphed into a true disaster is due to the addition of leverage, or borrowed funds, to acquire stock and equity positions in entities that are claiming to make such superlative returns.

And, the government keeps pumping taxpayer debt/money/future into these things in the hopes of reinflating the shredded bubble...

With debt so cheap, it became a tantalizing opportunity to borrow in order to take advantage of the "spread" between what a Madoff-like return would be vs. the low cost of borrowed funds. So, individuals and corporate investors end up losing not only everything they have, but also what they don't have.

Hmmm...Americans today and tomorrow and for many generations unborn will be FMR'd trying to pay back all this borrowed money?

What should be done about what has occurred? At the very least, corporations should spell out in bold type, with complete transparency, the "return of capital" in their quarterly and annual reports. "Return of capital" data should be required whenever comparing one company with another.

How about, when touting the benefits of the next bailout, Capitol Hill should be providing "truth in spending" information.  Just like when John & Jane Doe buy a house and mortgage?   How many years it will take to pay back these loans and who the loan shark is.  What is the real cost of spending $1?  $20 dollars paid back over ten years?  Maybe fifty years?  Maybe they have no clue how it will be paid back? 
What is the Obama administrations plan for paying back all this bailout money?

http://www.nj.com/opinion/times/oped/index.ssf?/base/news-0/1232082031213270.xml&coll=5

The story that comes to mind is about "the fox guarding the hen house".

Fox has been stealing chickens for years.  Taking advantage of small holes in the fence.  Making small holes bigger and squeezing through.  Digging holes and tunnels to go under the fence.  Climbing over the fence.  Taking advantage of the gate, when it is left open.

What has the farmer been doing all these years?  Patching the fence.  Adding an auto close door.  And maybe extending the fence just a bit lower.

Is that enough?  Maybe he could hire the fox to GUARD the hen house?  After all, the fox knows all about getting at those hens.  Maybe farmer doesn't really see the fox under all that fur and chicken feathers?  Capital idea!!!

What really needs to be done?  How about building a concrete or other sturdy barrier below the fence, a good foundation to prevent the fox from tunneling under?  How about a few watch dogs to patrol at night and during the day?  How about better fencing material?  Better hen house?  Keep up with maintenance? 

How does a farmer make a profit if they keep losing chickens?

Any chance the new administration will build a better fence?  Build a better hen house?

Or, will they just hire the fox to guard the hen house?

Anyone expect America's economy to be better in four years?

just my humble opinions