The United States Congress’ House Committee on Financial Services is now calling the Madoff scandal a Ponzi scheme. Hugh calls it "a metaphor for the current financial system and its failures." From his Scandals List (my bold):
Also on December 11, 2008, Bernard Madoff, a former chairman of the NASDAQ was arrested for perpetrating a fraud which lost up to $50 billion in investors’ money. It has been called the largest Ponzi scheme committed by a single individual in US history. This appellation is perhaps intentionally misleading because it distracts from the fact that the whole financial system has been run collectively as an over-sized Ponzi operation. Madoff began his investment firm in 1960. He had consistent profits regardless of market conditions which no one else could reproduce. In 1992, a fund associated with Madoff was investigated but he seems to have escaped any real scrutiny. It appears he operated his scheme for decades. By 2000, his company had several hundred million in assets and it seems to have ballooned into the billions in the Bush years. He was able to get away with his fraud for so long because he held his accounts within his own firm instead of with an outside bank. He had status as a Chairman of NASDAQ. He had successfully dodged one investigation. And with SEC Chairmen like William Donaldson (2003-2005) and Christopher Cox (2005-present) who were rabidly anti-regulationist, he was essentially home free. It took the financial meltdown to do him in. His victims include many retirees, charities, foreign banks as well as many celebrities and wealthy. Some of these certainly knew that what Madoff was doing was too good to be true but as long as he was making money for them they were willing not to ask to many questions. As part of an eventual settlement those who made profits with Madoff will have to return some or all of them to make good in so far as that is possible those who lost their shirts. It is still an open question where the money went, how much was actually lost, and who all was involved in Madoff’s crimes. In any case, Madoff is a metaphor for the current financial system and its failures.
Today, at 2 pm, the House Financial Services will hold a hearing: Assessing the Madoff Ponzi and the Need for Regulatory Reform
Kanjorski Announces Hearing on Madoff’s Ponzi Scheme Washington, DC – Congressman Paul E. Kanjorski (D-PA), the Chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, today announced that the House Financial Services Committee will meet on Monday, January 5, 2009, to assess the alleged $50 billion investment fraud engineered by Mr. Bernard L. Madoff that is now the subject of multiple investigations. The hearing will help to guide the work of the Financial Services Committee in the 111th Congress in undertaking the most substantial rewrite of the laws governing the U.S. financial markets since the Great Depression.
- H. David Kotz, Inspector General, U.S. Securities and Exchange Commission
- Stephen P. Harbeck, President, Securities Investor Protection Corporation
Harry Markopolos, an independent financial fraud investigator for institutional investors and others seeking forensic accounting expertise, as well as a Chartered Financial Analyst and Certified Fraud Examiner
- Allan Goldstein, a retiree and investor with Bernard L. Madoff Investment Securities
- Tamar Frankel, Professor of Law and Michaels Faculty Research Scholar, Boston University School of Law
- Leon Metzger, adjunct faculty member at Columbia University, Cornell University, New York University, and Yale University
For later viewing see the CSPAN’S video archive.
x-posted at oxdown.
* thanks Elliot for the reminder!