Ask any prison guard how many inmates in his charge believe they should be behind bars, and the answer will be the same: “None.” This is true no matter how heinous the crime – even if the accused admits he is guilty.

Bernard Madoff, the investment guru convicted of massive fraud, did plead guilty and apologized to his defrauded clients, who were his prey over a number of years. Some of the victims were close friends and family members. So to what extent, if any, were they guilty of greed and selfishness? Or did they really believe that Madoff was some sort of financial genius, remarkably making money for them while the rest of the market went up in smoke?

Switch now to the average investor, putting money regularly in a retirement fund, investment fund, home mortgage or other instrument. Realtors told the investor that home ownership was the way to go, and that in a specific instance the investor qualified for the monthly payment of say, $1500. Any third grader could have done the arithmetic and concluded that if the negotiated monthly payment on the mortgage was $2100, there would be a shortfall of $600 twelve times a year.

The masses are circling Madoff and shouting, “Get a rope!” But should charges of greed be confined to Madoff alone? While the rest of the world dealt with the ups and downs of the financial world, didn’t the old aphorism “if it’s too good to be true it probably is,” occur to Madoff’s investors?

The problem can be identified in one word: greed – the universal trait of acquiring more than we can afford or deserve at the time. This time, avidity and excess has placed all but a few Madoffites in a very unenviable position. For the rest of us, money has been lost in great and small amounts, resulting in home repossessions, loss of jobs, and loss of future goals such as a college education and retirement. For some it has meant a loss of the future itself: someone fired during this financial seachange may have to take employment several steps below his or her qualifications just to survive. If and when things get better, many months in the future, that employee will have lost years of experience and advancement.

While Bernard Madoff is everybody’s whipping boy, and for ample reason, there are those who hold the Securities and Exchange Commission mostly responsible for failing to uncover Madoff’s $65 billion fraud. Victims of the scheme have sent letters to Washington, telling of stress, failing health, loss of retirement nest-eggs and other varieties of financial ruin. Yet many of these missives barely mention Madoff, and focus instead on culprits who also deserve our displeasure. Another letter, made public by the government, said the reason for the SEC’s existence “is to provide the investor with a sense of confidence.” Another suggested that since the SEC failed the American public, the government should pay the victims.

Given the fact that millions of Americans have suffered personal anguish and financial ruin, one can understand the outbursts of bitterness and animosity at the nearest and most convenient whipping boy. Their frustration is furthered by predictions that the recession will continue for months – perhaps as long as three years. Among the hardest hit: U.S. charities. Spokespersons for variety charities are preaching this is not the time to cut back, but to “dig a little deeper.” Corporations, small businesses, and individuals who donate to the arts, education and social services are beginning to reduce their charitable donations. Making matters worse is the fact that 25% of corporate donations in past years have come from the very banking and financial sectors that are now in distress. An example is Lehman Brothers, a major corporate giver before its collapse in September.

Meanwhile, members of the House and Senate continue to bloviate and bluster. Senator Chuck Schumer (D-NY) warned that if the bonuses paid to many AIG executives weren’t returned voluntarily, the government will come and get them. The Bloviator of the Year award goes to Senator Charles Grassley (R-Iowa) who said he would feel better if the bonus babies would follow the Japanese example of taking a deep bow, apologizing, and then resigning or committing suicide.

While Americans hit hard by the recession agonize and wonder what will come next, the government postures and huffs and puffs and it members try to out-demagogue each other. They seem not to grasp the trillions of dollars in wealth that have been destroyed by fraud, deception, and incompetence. Their antics will lengthen the time it take for the average investor to regain any confidence in America’s financial markets.

The SEC stands accused of “financial illiteracy” by a major fraud investigator who chose not to reveal his name before he testified because he feared retribution from financial interests.


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