2017, A Hell Bound Train Of A Year (Part 2): Bernie Madoff & Donald Trump: A Tale Of Two Cons

-by Noah

People lost their life savings. They lost their homes. Their lives were destroyed. You didn’t think of that as stealing? People felt safe with you.

Yeah, but those were…

And yet you were betraying them all.

Well, but these people, you know they had a little greed in them, too. They were a little bit of, you know… Look, you know, and they didn’t wanna look too hard. They looked just far enough. So they’re accomplices in some way, too. - from a conversation between Bernie Madoff and his interviewer Diana Henriques

I recently watched HBO’s The Wizard Of Lies, a movie depiction of the $64.8 Billion Bernie Madoff scandal. The movie features one of Robert De Niro’s greatest acting portrayals, and it is so much more. As I watched it, I couldn’t help thinking about another big time con artist, a con who has perpetrated a tremendous con. The best con. The worst con. A con that makes your head spin. The con that put a conman in the White House. A con that makes Bernie Madoff look like a cub scout.

How’s this for perspective: Bernie Madoff’s con was sociopathic and evil. He ripped off $64.8 Billion, mostly from rich people, using his position and the trust he had built up over the years to his advantage. Many of his victims lost every penny they had. Many lost their homes. In the end, Madoff accused his victims of being greedy. Did they want more money? Yes, but they were really just looking for reasonably safe investments. The lion’s share of the greed was on the part of Madoff himself, as he looked to acquire massive amounts of money for his family. Some of his victims who weren't rich suffered because their pensions had invested with Bernie. They had their futures tied into Madoff's scheme without even knowing it, until it was too late.

Donald Trump’s con, on the other hand, was for an exponentially larger amount, $1.5 Trillion, an amount that, incredibly, makes Madoff’s con look embarrassingly small. But wait, there’s more. Trump’s con was every bit as evil but he stole from people who aren’t rich to give to the rich, including himself and his family. As for the trust element in regards to Trump, it’s safe to say the rich knew of his reputation as a conman and were all for it. Unfortunately, millions of other voters refused to see the obvious; letting their bigotries and emotions make their decision at the voting booth. They were easy marks and now they will pay, as will so many of us.

Despite the huge difference in the amounts conned, one almost has to ask if the two perps were separated at birth? Bernie Madoff and Donald Trump are both two American criminal masterminds: two of the very, very biggest and worst of all time. One is a sociopath. The other one, currently masquerading as a President of the United States, is even worse. He is a psychopath. It’s important to note that, in both cases, the victims looked just far enough to see what they wanted to see. When the history of both men is written, it will be noted that, in each case, the people around the victims also paid a price. To the perps and their defenders, none of that matters for a second, as long as the money is in their pockets, that is.

What does matter is the size, scope, and down the road effects of the scam. The Madoff scam ruined a lot of people. Tax Scam 2017 just might ruin the United States of America, turning it from a small d democracy to a large O Oligarchy.

Madoff’s con ruined the lives of countless people and destroyed companies with a financial ponzi scheme that stole their money, while telling investors that their money was being invested while, in reality, it was being put into his pockets and his company. Trump’s con is being sold on a myth that those getting the money from us will invest it for the great good. It’s called “Trickle Down.” It has already been shown to be nonsense going back to Ronald Reagan’s bogus “Trickle Down.” On top of that, today’s corporate CEOs made it clear that they weren’t going to invest the money in anything other than shareholder stock prices and their own offshore bank accounts.

Once the Tax Scam passed both houses of Congress, you could hear the laughter coming from Washington and Wall Street. It was the Republican Party’s biggest F.U. to date.

Trump, of course, has a history of, among other things, ripping off people who work for him by not paying them the contracted amount and goes Bernie one further. He doesn’t care if anyone dies from the acts of greed he plans and partakes in. Witness Trumpcare and now, the aforementioned Trump/Ryan Republican Tax “reform” Scam, both of which aim to take money from us and put it into the pockets of the super rich. Working with fellow congressional scammers, Trump even managed to combine the two in his $1.5 Trillion scheme. No doubt, he calls that efficiency.

Many of the victims of Trump’s ideas for “healthcare” will die of cancer and other diseases. Many now will go undiagnosed. It’s all in order to give himself, his family, and his allies in Congress (I’m talking ‘bout you Paul Ryan, Mitch McConnell, et. al.) and the corporate world that humongous tax break that will redistribute a historical amount wealth upward from out of the pockets of the middle and lower rungs of the class ladder to the pockets of very highest. Madoff just wanted the money. Trump wants to create dynastic oligarchies. It’s a matter of proporation or scope. And, forget about the idea of subsidizing Big Pharma as part of Obamacare. The Republican Tax Scam does much more than make up for any loss from that.

Trump and his party’s ideas for the alleged tax “reform” are part of a two-pronged plan that do the same thing, not just because the Republican tax scam contains some fine print that will all but end Obamacare, but also because of what it would do to the financial security of millions and millions of Americans and their families to begin with, all while those at the very top increase their financial distance from the rest of us. Cuts to Medicare and Social Security which will threaten lives, shorten lives, and lessen the dignity of lives are now planned in order to pay for the money being doled out to the rich and to corporations. No doubt more money will be borrowed from China, thus providing a further drag on the nation’s economy in the future. You have to have a very sick mind to want that any and all of this. You have to be psychotic. It’s called building a society of lords and serfs. Madoff was greedy alright. Trump is Madoff times millions, if not billions, with the deaths thrown in as an added touch that only adds to his smirk.

The rich will not be gaining from this plan.
- Donald J. Trump, at the White House, 9/12/17

If Bernie Madoff is “The Wizard Of Lies,” Donald Trump is “The Beelzebub Of Bullshit.” Gullible, naïve people fell for the cons of both men. Both promised the world to their victims. In the case of Trump, it isn’t just the individual investors that will be victims. Madoff was to the financial world what Trump is to the political world. Madoff was once even the Chairman of NASDAQ and built his con on a ponzi scheme.

Trump launched his candidacy for president on, among other lies, stories of a non-existent conspiracy of birtherism and false tales of thousands of Jersey City Muslims cheering as the World Trade Center towers crashed to the ground. Now, he continues to con his gullible supporters by saying that news of his own particular scandals are “fake news.” His favorite “journalist,” Alex Jones, even tells his fans that the Sandy Hook massacre of children is a hoax, and, they believe it.

Madoff, incidentally, ignored the events of 9/11. He made no claims of seeing cheering Muslims. While everyone else in his offices had their eyes glued to the TV sets, Madoff stayed at his desk building his ponzi pyramid and ripping off his investors. Being a con artist requires a certain kind of single-mindedness.

Both Madoff and Trump knew that the world is full of easy marks. They made good use of that knowledge and caused staggering damage. In the case of Trump, the damage is still growing and there’s no telling where it will end: a final, total worldwide financial collapse? World War III? A screaming, babbling, madman, losing control of his bodily functions, clawing at the White House carpeting as he is dragged out?

People have been talking about the end of the cycle for 12 years, and I’m excited if it is. I’ve always made more money in bad markets than in good markets.
- Donald J. Trump, 2007

Housing market crashes usually precede a greater economic crash. If you’re worried about the current rumblings in the housing markets, don’t go thinking that Trump is worried about it. For him, it’s an opportunity. He isn’t going to be thinking of people who lose their homes any more than Bernie Madoff did. He’s the maggot that eats up the mess.

In The Wizard Of Lies, we see Madoff sitting at his desk creating his fragile pyramid. He’ll smooth talk his marks in meetings on Long Island or at New York City restaurants, and also, interestingly enough, Trump’s Palm Beach Mar-a-Lago resort. Madoff’s scam had global reach through the markets but his world is small, at least compared to Trumpworld. Madoff played stock market schemes. Trump casts a bigger net. Trump played the students of Trump University. Trump played Atlantic City. Trump says he doesn’t know convicted stock swindler Felix Sater, a Russian crime figure. Yet the photos say other wise, as do real estate scam lawsuits. Trump and his son bilked a kids cancer charity. I doubt even Madoff would have gone there.

Trump has spent years traveling to Russia and China. God knows what he’s been doing but you know it isn’t good, at least not for anyone who isn’t a relative or an associate. His world is so much bigger than Madoff’s was. What pieces of the action has he sold to America’s adversaries and for what price? What has he bought with scammed and laundered money? When he works to destroy our budding solar industry, China laughs, knowing that he’s handing it over to them while we lose staggering amounts of jobs in the new industry as a result. The TPP had flaws, but now that Trump has pulled out of it, China’s dream of unrivaled domination of Asia and the Pacific Rim is coming to fruition.

Russia? Putin wants to move and strengthen his sphere of influence over Eastern Europe again. Trump talks down the importance of NATO while he seeks to build hotels in Russia. Where does that partnership go? Where does it end?

Whatever Robert Mueller and his team find out about Trump and his crime syndicate; it will just be the top of the pyramid. Even with whatever Mueller does find, it will be so awful that they’ll never tell us the complete story. Any trial will just be the farce of a pantomime trial. Why? Simple. As they allude in The Wizard Of Lies a full trial would require putting many of the richest men in the world on the stand. That ain’t gonna happen. You’re not going to see people like Putin, the titans of the banking world like Jamie Dimon, the Koch brothers, Secretary of State Rex Tillerson, various oligarchs, drug lords (legal and non-legal), or any of the top political donors for either party facing questions on the stand from smart inquisitive lawyers. We got that story with Madoff. Anything we do see will be well scripted in advance. The Trump scams are so much bigger and so much uglier. Some in charge will think we can’t handle the truth. They’ll say that if we knew the truth of what goes on with our leaders and the financial community, the whole world economy would disintegrate in a giant explosion of flame. Others in charge will want to keep it from us, keeping the roadmap

The message must be sent. Mr. Madoff’s crimes were extraordinarily evil. This kind of staggering human toll.
- Judge Denny Chin, presiding judge, Madoff sentencing hearing.

There are other similarities and differences between Madoff and Trump, of course. Although, to this day, Madoff rationalizes his 150-year prison sentence by saying that, after the 2008 crash, “they” just needed a “face to blame,” and although Trump will blame others as he always does, both parasites will never admit to their frauds. In the end, Madoff plead guilty; something Trump will never do. Madoff went to jail but he couldn’t admit to his failure. Trump would rather be paid to go away like Nixon was, or get to keep his swag, also like Nixon (his pension and aides paid for by us). Also, Madoff was turned in to the authorities by his sons. None of us will hold our breath waiting for Eric or Don, Jr to do the same.

By the time the era of Trump and his cohorts is over, who knows how much money disappears into thin air? With Madoff, it was billions. Trump will take pride in how much more he makes disappear.

If he’s allowed to continue, Trump will follow his idol Putin’s ways. Every exchange of money will involve a cut for hm. That is his dream. If allowed to continue, he will do it with his little puppy Paul Ryan on his lap and slobbering hound Mitch at his side. He will take the ultimate perverse pride in being the best conman who pulled off the most tremendous con of all; getting to the White House and using his power and position better than anyone, better than any two bit dictator ever, to ruin the lives of millions and millions of people, if not billions. Caligua and Hitler, and Stalin. Louis XVI, Saddam Hussein, Chairman Mao, Ferdinand Marcos, Idi Amin Dada. Putin. He longs to top them all, paint the White House gold, inside and out, and yell “Let them eat cat food.” That, too, is his dream. It is the dream of a true psychopath. Only the 2008 crash stopped Madoff. What will stop Trump? Mueller? A bigger crash due to insane Republican policy?

Madoff’s dreams were puny compared to those in the sick mind of Trump. Trump and his cronies look at all of us as marks, not just a relatively small list of clients like Madoff kept in his desk. Trump and his cronies seek to take more of our money, bigger percentages of our money to finance their dreams of a 1000 Year Reich Of The Rich. They don’t need armies. They just need our money to make more money and to gain more power over us. Lords and serfs. The con is on. Over 60 million Americans gave it their stamp of approval last November. To paraphrase Diana Henriques, the reporter who broke the Madoff story, the true measure of the con was not what was lost but what people had left after the fraud was revealed. The thing with Trump is that, the longer the fraud goes on, the worse the world will be when the full extent of what he’s done and is doing is revealed, and he’s gone.

In a recent commencement address at Brown University, De Niro, who had so deftly played Bernie Madoff artist, spoke of Don the Con, saying

When you started school, the country was an inspiring, uplifting drama. You are graduating into a tragic, dumbass comedy.

Worse Than Michael "Mikey Suits" Grimm-- Steve Israel And Congress' Culture Of Corruption

Israel never turned over any of the tainted Madoff cash that flowed his way

The DCCC is making a lot of hay lately about all the trouble Michael Grimm (R-NY) is in with the law-- and they should. He's lowlife scum who disgraces Congress with his very presence. Earlier today we looked at the shady fundraising techniques Grimm and co-conspirator Aaron Schock (R-IL) have engaged in. A regular and very reliable correspondent from Capitol Hill emailed me this:

You're getting closer to uncovering the real criminal activities Grimm has been engaging in from long before he was elected to Congress. But why did you leave out our side of the aisle? Why not drag in the Steve Israel-Bernie Madoff connection?

Ah, yes, the long whispered about Steve Israel-Bernie Madoff connection. A few weeks ago we mentioned, in passing, how Steve Israel ripped off his synagogue and then broke serious campaign finance and tax law when the synagogue board threatened to go to the media. To reiterate:

One of Israel's Long Island neighbors, a constituent and on the board of the synagogue Israel attended, wrote this on his blog a few months ago:

My "Representative" Steve Israel is more than someone with whom I disagree with politically. He is a man with the moral fiber to stiff a Synagogue out of thousands of dollars when he decided to move (a debt that was eventually paid by an anonymous donor when a member of the Synagogue's board threatened to release the info to the press-- yes that was me).

The "anonymous donor," basically gave a hefty bribe to Israel-- a tax-deductible one-- by paying off his debt. It's so illegal and unethical!

That was when my friend on Capitol Hill sent me an amazing spread sheet of major Steve Israel donors, Howard Wohl and Lawrence Simon, who were tied to the Madoff scandal in a major way. Both were sued in connection to the case by then-NY Attorney General Andrew Cuomo and the settlement was $210 Million. When Israel applied for the DCCC chair it was because he said he could deliver-- which he did-- major donors like Wohl and Simon. Wohl particularly gave tens of thousands of dollars to the DCCC and the associated House Majority PAC and well as to Israel himself and other candidates Israel pointed him to.

Another big Israel donor, Fred Wilpon, a real estate developer and the majority owner of the Mets, was also associated with the Madoff case. According to a source inside the case, when Wilpon was crying about having "lost" $700 million in Madoff's ponzi scheme, he was actually hiding the fact that he didn't lose, but had profited by $300 million. Eventually he had to settle with the trustee for Madoff victims to the tune of $86 million. The Wilpons previously had to settle on another Ponzi scheme (masterminded by Samuel Israel) they were involved in with the  Bayou Group LLC.

The owners of the New York Mets baseball team, subject to a demand by the trustee liquidating Bernard Madoff’s firm to pay $1 billion to end a fraud lawsuit, may model any settlement on a deal they struck over their involvement in the Bayou Group LLC’s Ponzi scheme.

In the Bayou settlement, the Mets owners gave up all fake profits they made in that $400 million fraud plus 44 percent of their principal after a judge ruled their initial investment could be pursued because of “red flags” they saw about the possibility of a fraud.

Trustee Irving Picard had said in court papers that he wants to recover about $300 million in alleged phony profits from Madoff’s scheme made by Sterling Equities Inc., which owns the Mets baseball team, Mets Chairman Fred Wilpon, Mets President Saul Katz and Chief Operating Officer Jeff Wilpon, and other related parties. Picard also demanded an unspecified amount of principal back from the Sterling defendants.

Today, Picard lawyer David Sheehan said the trustee is seeking a total of $1 billion from the defendants. To recover the additional $700 million, the trustee must prove, “using the red flags and other evidence,” that the Sterling defendants had enough information that they should have discovered the fraud, Sheehan said in an e-mail.

…Howard Wohl, co-founder of Ivy Asset Management LLC, warned Saul and David Katz and Arthur Friedman about Madoff at a meeting in early 2002 to discuss the formation of the Merrill- owned entity, Sterling Stamos, a hedge fund partnership of Sterling and Peter Stamos, Picard said.

Former New York Attorney General Andrew Cuomo sued Ivy, Wohl and Ivy Chief Executive Officer Lawrence Simon in May.

Cuomo, now New York’s governor, claimed Ivy and the executives hid their doubts about Madoff from their own customers, who lost $227 million while the firm reaped $40 million over 10 years for Madoff-related work.

These three characters and their families gave the DCCC under Israel-- and Israel individually-- over half a million dollars, sometimes in small amounts like $250 and $500 increments, other times in $30,000 and $25,000 lump sums. None of the tainted cash was ever returned or donated to charity or anything like that. So, yes, Michael Grimm and Aaron Schock should be prosecuted to the full extent of the law and both should spend the next decade in prison. Steve Israel? Much worse. Nothing will happen because both parties do it-- and do it a lot.

Capital Crimes: The Banking and Corporate World Returns to Its Roots

Was Bernie Madoff just a sideshow distraction?

by Noah

I have a confession to make. I, Noah, have a family member, a cousin, who is in the banking business.

There, I’ve said it; full disclosure. He even looks a lot like me. It’s a tough thing to live down, but during my life I have saved up -- you might say banked -- more than my fair share of humility, if not greenbacks. Anyway, needless to say, we have had some interesting e-mail conversations lately. My cousin, being on the inside, tries mightily to convince me that not everyone in his chosen field is a sleazebag. Oh well, who am I to talk, after a lifetime in the music business?

Now, in the famous words of one of America’s bigger sleazebags, Richard M. Nixon, let me make one thing perfectly clear: My cousin is no sleazebag; just as I am no sleazebag (no matter how I might try, in an effort to get along). Still, with yesterday’s news about the arrest of six, count ‘em six, “former” executives from brokerage house Sky Capital, it’s beginning (well, actually, it began long ago) to look like, when it comes to Wall Street and the banking gang, not only can’t my cousin see the forest for the trees, but there may be hope that at least some of these dream-snatchers may get at least a tiny bit of what they deserve.

In the recent past -- OK, all of my life -- I have been called cynical. I prefer the term realistic. When it comes to Wall Street and banks, I have never bought into the “it’s just one, or a few, bad apples” misdirection play. They would like you to believe that old Bernie Madoffwithyourcash was just a lone gunman, an isolated case. To them, Bernie was a gift, a big fat attention magnet that served as a media-served distraction while they continued their mega-fleecing of the taxpayer. (That would be us.) The whole Bernie thing has always been a case of “Hey, look over there!”

This whole thing about the financial sector of our country is looking like the local scoutmaster that says there’s only one dead boy in his basement, and when the authorities show up with the backhoe and tear up the garden, lo and behold, he was telling the truth: There was only one in the basement; the rest were pushing up daisies in the back yard. The Sky Capital arrests are welcome, and you can bet many, many more are way overdue.

These worm-infested doggie turds have been accused of conspiracy and securities fraud having to do with the manipulation of shares in two Sky Capital companies. The alleged crimes took place mainly through their firm’s plush New York offices. The SEC alleges that the gang raised more than $61 million in a scheme that restricted their investors from selling their shares. When trading in their stocks was suspended in London, the investors were left with nothing but air. Call it a Ponzi scheme or a sting; the result is the same. I wonder where da money went.

I guess it’s just another one of those seemingly endless “isolated cases.” In my dream world, the feds would fill up the New York Mets' new Citi Field with all of these “isolated cases” in one big irony Irony Fest! Then, we can bring in my all-volunteer army of gladiators to dispatch them all to Dante’s Seventh Circle of Hell.

************

And now a word about the next step in asset management: Last Friday, Reuters, a news organization that wipes the floor with most of its American counterparts, ran a story that was headlined: “Would You Pledge Your Soul As Loan Collateral?” Feel free to go back and read that headline again if it sort of stunned you into a state of WTF-ness.

It seems that Latvia, the EU nation that has been hit the hardest by the current economic crisis is home to a loan company named Kontora. This company even dares to have a public face, a straight one at that, named Viktor Mirosiichenko. I kid you not; clients have to sign a contract that states that the collateral for their loan is “my immortal soul." I checked the byline for the story. It wasn’t Rod Serling, although we have obviously entered a twilight zone.

Mirosiichenko promises no violence. “If they don’t give it back, what can you do? They won’t have a soul, that’s all,” he told Reuters. His office, in a basement, consists of a desk, a computer, and three chairs, and yes, the company name is on the door. I’m not sure how hot it might be in the basement. So far, though, Kontora has given out loans to 200 people.

Hey, at least, one company is giving out loans, stimulus money or no! What is your Soul Credit Score? What I have to wonder is: Is Kontora just a Latvian wing of some American company like Chase or Citibank? Is this all a test-market program to check out the viability of the idea before they bring it to America and start advertising it on TV? Will I be getting an offer in the mail from Chase soon? Is it just that financial folks have no souls left, so now they want yours or mine?

I have felt for a long time that the goal of the corporate masters was to herd us back into a medieval society of lords and serfs. This kind of soul-taking thing is just more evidence in support of my clairvoyance. It’s really old school. Can the debtors' prisons that Charles Dickens not only described in his iconic works but actually lived in as a 12-year-old be returning?

Think about it. What will they do once they have taken everything?

They will take away our jobs and our homes and our health. They will shatter our American dreams of upward mobility and a dignified retirement by stealing our 401(k)s. What will be left then other than selling our children like the Chinese, and then our very souls? The only way a guy can make a dollar will soon be to sell his blood to a blood bank and his sperm to a sperm bank, like homeless people and artists have for years. They won’t even wait until we're dead to remove the gold from our teeth. MAKE BIG CASH NOW! At least the old business model was fun for someone, and everybody got paid.



But wait, there’s more! And it’s not all bad. In the city of Amsterdam, Holland, there's something called Project 1012, being pushed by key business powers. It’s a plan to get previously denied banking and credit services for prostitutes who can’t get accounts from the usual mainstream institutions, even though in Holland, a more enlightened country than ours, prostitution is legal. So, if it’s legal (and really, even if it weren't), why not extend services to sex workers? They have a job that pays well, and they have talents that are always in demand.

To date, the world’s oldest profession has gotten the shaft from financial institutions just like the rest of us (hey, I couldn’t resist, and I coulda said it much more graphically), and I suspect that bankers have often been their customers. Clearly, financial institutions in other countries are looking for more ways to make money other than demanding cash from taxpayers as they do here. Maybe now they’ll actually start dressing like pimps.

************

A company called Worldwide Entertainment has now been charged with financing professional celebrity and exhibitionista Paris Hilton’s film Pledge This with a Ponzi scheme. It’s The Producers come to life! Most of us took The Producers to be a great movie and then a great play. Apparently others took it to be a “how to” instructional tool.

Is this the future for Hollywood? Corporate types like to throw around the word innovation. Can’t meet the quarterly numbers? Maybe a nice shiny Ponzi scheme is the solution for your company! IT’s NEW! IT’S EXCITING! IT WILL SAVE YOUR ASS! Right up until the day that it crumbles and you go to jail and meet your new love interest.

************

So what do we have here? What have we learned today? What questions remain?

Do we all become hookers or gigolos? I think that ship has sailed for me. Sell my blood? I don’t think so. A platoon of doctors has pumped so much crap into mine to keep me going in the last couple of years that I doubt that it has much resale value. I do have some nice gold inlays, though. But what of those who sell their immortal souls for a loan? What if someone has already sold their soul? Is it over for them?

And think of this: How long is it before the financial institutions that procure your soul take your soul and bundle it with other souls and use them as securitized collateral in a mortgage deal? It will be Fannie Mae and Freddie Mac all over again, or worse, the alleged much bigger real culprit, Countrywide. (Is it derivatives or money from nothing but thin air?)

Foreclosures were up a staggering 844,389 during the first quarter of this year. That’s up 73 percent from the first quarter of a year ago. With banks and lenders about to get a second (!) welfare handout, er, stimulus check, paid out from our money, it would make sense to give money to borrowers, but then it would have made sense the first time too, and they just pocketed the cash. The operating phrase, of course, is: “it would make sense.” If the various lenders are concerned about defaults, why not give those who borrow more help in the first place? Ah, but if, at the end of the day, you really just want the real estate, or better yet the borrower’s soul… 

It looks, however, like banks will soon have more homes than they can possibly sell, because no more than a few people will have enough money to buy them. Termites everywhere will rejoice. Genius! By the way, Big Oil has been buying up watersheds in anticipation of the day when the oil fields run dry. They’ll just convert the gas pumps to water pumps. Can the air be far behind? Oh, that’s right. Gas stations already sell air.

Shylock! Scrooge! The moneychangers! These are apt role models for most of today’s bankers and lenders. Follow the money! In God We Trust! The very word credit comes from the Latin credo, which translates to "I believe." Kinda Tinkerbell-ish, isn’t it? Do you believe? Start clapping.

We’re going back to the past. Maybe the real question is: What will we do when they've taken everything? Ask the ghosts of the French aristocracy from circa 1790. An economic bubble burst then too, and the “Let them eat cake” set met their well-earned demise. The financial and corporate worlds are heading back to their roots from hundreds of years ago. It’s Shakespeare’s Shylock demanding a pound of flesh (and he really did mean ‘flesh’). The Merchant of Venice -- anyone notice the irony that the whole city of Venice is sinking?

Shakespeare’s Venice can now be seen as a metaphor. The roots of our banking system began there back in the 1300s. Glub. Glub. How about Dante’s depiction, in the great Divine Comedy, of a special portion of that Seventh Circle of Hell, which I mentioned earlier? In Dante’s work, in the inner ring of the Seventh Circle we find usurers, who sit for eternity (as Wikipedia puts it) "in a desert of flaming sand with fiery flakes raining from the sky," with their necks weighed down by bulging purses.

Not bad, but I also like an idea from one of my favorite spaghetti Westerns, Death Rides A Horse. In it the bad guys have a penchant for burying the good guys in the sand in the desert. Before they ride away to their next bit of mayhem, one of the gang of ne’er-do-wells is chosen for the honor of “serving the salt” to the victim, thus hastening the victim’s thirst and agony. They even place a bowl of water, glistening in the hot sun, in front of the victim, just out of reach, of course.



It’s time to somehow turn the tables.

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Bernie Madoff-- Is $171 Billion And 150 Years Enough?

You may have guessed that there is no sympathy for crooked banksters here at DWT. When it comes to corporate crooks-- and political crooks-- this is a strictly law and order blog. If a man steals to feed his starving children, that's one thing. If a man steals because he's competitive with someone who has 10 million dollars when he only has 2 million... throw away the key. And I for one am delighted that the authorities plan to throw away the key when it comes to Bernie Madoff. Throwing away the key and severe confiscatory policy is exactly what these people deserve. Pennilessness is what they have earned and the idea of Madoff forfeiting $171 billion is perfect-- unless he has $171.1 billion. It pisses me off that some softy in the justice system decided that Madoff's moll is somehow entitled to $2.5 million in assets when in reality she should be thrown in prison as an active accomplice.

The 71-year-old Madoff pleaded guilty in March to charges that his exclusive investment advisory business was actually a massive Ponzi scheme. Federal prosecutors say Madoff orchestrated perhaps the largest financial swindle in history.

Larger than the Bush family's? Not by a long shot. Larger than the massive rip-offs of the public by Enron economics? Of course not.

In their submission, prosecutors cited fraud cases against Adelphia founder John Rigas and his son Timothy; former WorldCom Inc. Chief Executive Bernard J. Ebbers; Refco Inc.'s former Chief Executive Phillip R. Bennett; and ex-hedge fund executive Samuel Israel III.

They said any comparison to those cases "simply underscores the harm" caused by Madoff's conduct, as well as the scope, complexity and duration of the fraud.

John Rigas [a major GOP donor], convicted of fraud and other charges in 2004, is serving a 12-year sentence after initially being sentenced to 15 years in prison, while his son is serving 17 years in prison.

Ebbers [also a GOP donor], convicted of fraud and other charges in 2005, is serving a 25-year sentence; Israel, who pleaded guilty to fraud and other charges in 2005, is serving a 20-year sentence; and Bennett, who pleaded guilty to a 20-count indictment in 2008, is serving a 16-year sentence.

Don't You Just Positively HATE Having To Take Your Shoes Off At Airports?

Did the Feds seize the fancy hookers too?

It's so demeaning-- and the belts and all the other little indignities that have been flying such a drag. Glenn Greenwald doesn't paint an optimistic picture that Obama has any intention of fixing some of the Bush human right violations against the really big personal freedoms, so I have a feeling air travel will still be horrible for people like me and "Sir" Stanford. You remember him, right? Back in February Neither Ken nor I could stop writing about him. Well, yesterday "Sir" went crying to ABC News-- literally crying-- about how horrible his life has become since he was exposed as another Bernie Madoff Ponzi-operator.

The government seized his money and he now barely has a change of clothes and "was forced to fly on a commercial plane for the first time in almost two decades after the government seized his fleet of sic private jets. 'They make you take your shoes off and everything, it's terrible.'"

Poor thing! But he hasn't lost his spunk. He threatened to punch the ABC interviewer in the mouth when he asked him about charges that he had been laundering money for a Mexican drug cartel, although he did admit that the pesky government did find $3 million in drug money in his bank a few years ago. He doesn't deny it at all but bitches that it only gets in the news because he's flamboyant. His spirits are buoyed by the support he's getting from golfer V.J. Singh-- although Singh, who is sponsored by "Sir" says the support is just "at the moment."

As long as we're talking about the Feds seizing "Sir's" fleet of planes, I thought your own spirits might be buoyed, even for just a moment, to know they are also seizing the Madoff's West Palm Beach estate. Yesterday's Daily Beast had a soap-opera's worth of the tribulations of Ruth Madoff-- tribulations now; trial will come later. But picture this on afternoon cable:

As Ruth Madoff swept into Palm Beach last month with a quintet of girlfriends, her $7,500 Birkin bag dangling, her husband’s 74-year-old sister, who was ruined by Bernie’s scam, was watering plants and driving people to the airport just to make ends meet.

Sondra Wiener, forced to make pocket money like an out-of-work laborer, endures the pity of her neighbors. After her brother's scheme collapsed, she also put her home in a gated community outside Palm Beach up for sale. Her brother mailed her and other family members Cartier, Tiffany, and other expensive jewelry in December (which violated a court order and were repossessed), but sources say they do not think her sister-in-law Ruth has given her money. And Ruth is believed to have plenty, even now. Although authorities have seized her property and bank accounts—most recently the Palm Beach home and the antique yacht restored by Bernie—investigators describe caches of laundered funds hidden around the world in Ruth’s name.

...The name Madoff inspires an eerie silence. In particular, the very mention of Ruth seems to arouse fear. Those few who knew her well won't talk about her, those who knew her less well will only talk anonymously.

“Everyone down here thinks she was involved in the Ponzi scheme," said a leading socialite in Palm Beach. "She and Bernie were always collaborators. Look, let me tell you what happened to my friend. Her husband wouldn’t let her invest with the Madoffs. Then after her husband died, Bernie wasn’t taking any new investors. She talked to Ruth who said give Bernie a call and she told him 'Ruth knows what this is all about' and Bernie simply said 'OK, I'll take your investment.' And this woman gave him the store and rued the day she had met Ruth Madoff."

$100 Million In Taxpayer Money Going To AIG Top Executives

Bernie Madoff is complaining his first meal-- microwaved frozen chicken patties and canned string beans-- was served in a styrofoam container.

As one veteran defense attorney, who has had several clients locked up in the jail, put it: "Le Cirque it ain't."

While he's in "the box," Madoff's relatives won't even be allowed to put money into a commissary account, which would allow him to supplement the meager fare with chips or candy bars.

Each family member should be brought into a room and asked to give the location of every single cent they have. If they hesitate they should be shot and I'm guessing the next one will tell where whatever is left of the between $65 and $170 billion they stole will be recovered, although, I wouldn't mind if 2 or 3 of them leave this mortal coil before the third or fourth one coughs up the loot. I have no sympathy for any of the Madoffs' feelings of self-entitlement. He should feel lucky he's being fed on styrofoam instead of being fed styrofoam. I'm sure it's better than what I was given when I was in jail near Mazar-i-Sharif.

Now something I do get upset over is when taxpayer money-- we bailed out AIG to the tune of $170 billion-- gets put into bonuses for the failed executives who have forced their companies onto the public dole. In fact, I'm fuming over a report in the NY Times that AIG is paying out "about $100 million in bonuses to executives in the same business unit that brought the company to the brink of collapse last year." Seven of these losers are due to get over $3 million each and one gets over $6 million-- of our money... in the middle of a Depression they helped cause. Geithner told them that that's a no-go but the government-appointed chairman, Edward Liddy (a Republican scumbag who has donated thousands of dollars to the GOP), came back and told him that AIG is "contractually obligated" to pay them. Geithner said ok. Obama should fire both of them. These guys aren't living in the real world.

Liddy defended the need to continue paying bonuses if A.I.G. was going to unwind the rest of its disastrous mortgage-related business at the lowest possible cost to taxpayers.

“We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses-- which are now being operated principally on behalf of American taxpayers-- if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he wrote Mr. Geithner. The government owns nearly 80 percent of the company.

It's time for Liddy and Geithner to get a clue. They don't have the best; they don't have the brightest. They employ a bunch of failures and losers who are lucky to have jobs at all after leading their company into the toilet.

Wednesday morning the House Financial Services Committee will be holding an AIG hearing at 10AM. These people won't be facing a Wall Street shill like Geithner or a panel like Stephanopolous' today on ABC-TV. They'll be facing Barney Frank, Alan Grayson, Brad Sherman, Jim Himes, Jackie Speier, Mary Jo Kilroy, Keith Ellison, Brad Miller, Gary Peters and Maxine Waters. (I might add the committee also includes worthless Blue Dogs and fellow travelers with no comprehension of how to deal with banksters and corporate crooks-- i.e., their campaign donors-- so expect either silence of meaningless palaver from the pathetic likes of Melissa Bean, Joe Donnelly, Travis Childers, Walt Minnick, Bill Foster, David Scott, Ed Perlmutter, Ron Klein, Dennis Moore, Gregory Meeks, Joe Baca and Paul Kanjorski-- not to mention that crooks on the other side of the aisle, from Spencer Bachus and Frank Lucas to Kevin McCarthy, Patrick McHenry, Scott Garrett, Gary Miller and Michele Bachmann. This should be interesting to watch. Sharpen your pitchforks.

Is this an admission of criminal activity? Cramer says most of it is legal-- but won't talk about it on TV. Maybe Cuomo should take a look. I hope you're not feeling sorry for this whipped dog.




UPDATE: CHENEY GIVES BARNEY FRANK THE WINGNUT SHOUT-OUT!

House Financial Services Committee chairman, Barney Frank, is who the guilty Republicans caught with their fingers in the cookie jar or, alternatively, asleep at the switch, like to blame for the disaster they made of the economy. Frank answered one such clueless loon, Todd Akin (R-MO), last week. Cheney piled on today as though his authoritarian voice would sway anyone not already a complete dittohead. While Cheney was on CNN trying his hand at re-writing history, Barney was over at Fox talking about recovering the bailout money stolen by AIG executives as bonuses. And Russ Feingold (D-WI) sent a letter:

The Honorable Timothy Geithner
Secretary of the Treasury
Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, DC 20220

Dear Mr. Secretary:

I deeply troubled by reports that the American International Group (AIG) intends to pay about $165 million in bonuses to its executives. As you know, the federal government has provided AIG with $170 billion in taxpayer money and currently owns 80% of the company. I share your outrage that a company which has been bailed out by the taxpayers for its mistakes would turn around and pay its executives such a staggering sum of money.

Reports suggest that AIG’s chairman claims AIG is legally obligated to pay some or all of these bonuses. I write to ask why any bonuses would be legally required, given the company’s abysmal performance. In addition, I would like to know what legal options have been explored for canceling the bonuses or recouping the money from the recipients, and in particular whether the Administration has considered holding AIG executives accountable in court for any breaches of their fiduciary duties to the shareholders.

Reports also suggest that AIG’s chairman claimed that the bonuses are needed to ensure the company can “attract and retain the best and the brightest talent to lead and staff the AIG businesses.” Since some of the recipients of these bonuses may have been responsible for the practices that drove the company to the brink of collapse – jeopardizing the financial system – I am sure many Americans will question whether they are indeed “the best and the brightest” and whether they deserve this level of taxpayer-subsidized compensation.

I look forward to your prompt response.

Sincerely,

Russell D. Feingold
United States Senator

"Justice" Is A Pretty Subjective Thing-- Especially For The Rich And Powerful, Like Madoff, Cheney And The Banksters

Muntadhar al-Zeidi was sentenced to three years in jail for tossing his shoes at George Bush, although he didn't hit him with either. He did hit a sweet spot in the consciousness of the people of the world who view him as an heroic figure standing up for us all against the incarnation of absolute evil. Two nights ago Seymour Hersh publicly exposed a covert CIA "executive assassination ring" that reported directly, if unconstitutionally, to Dick Cheney. There is virtually no chance that Cheney will ever face any kind of justice for murder or for subverting the Constitution.

And today we find out that Bernie Madoff has backed out of his plea bargain in an attempt to cover up for his criminal relatives. He is willing to spend the rest of his life in prison-- for stealing $64.8 $170 billion in the biggest ponzi scheme ever-- but wanted his co-conspirators to walk away scott free. According to Bloomberg.com this morning he "didn’t agree to a plea deal with prosecutors because of their demand that he admit to a conspiracy, a charge that would require him to say he worked with others." He did plead guilty to 11 charges this morning in court.

Madoff’s decision not to negotiate a deal means the government won’t have his help in determining whether his employees assisted in the fraud, the people said. Madoff, 70, will plead guilty today to all 11 counts he faces without any promise of leniency or anything else in return. He could receive 150 years in prison at sentencing on charges including fraud, perjury and money laundering.

The conspirators who so far look to walk away without charges-- but with plenty of loot-- are his wife, Ruth, his two sons, Mark and Andrew, and his brother Peter, the chief compliance officer at Madoff's criminal enterprise. All of them say they didn't know nothing about any fraud at the company. And Madoff will do soft time in a low-security prison. He stole almost 65 billion dollars and wrecked countless lives and helped destabilize the country's economy. But soft time is what our elites get in the absolute worst case scenario-- and their crooked families still get to enjoy the fruits of their criminal activities. Interesting interpretation of justice. (And, of course, the corporate media is already trying to drum up sympathy for poor Bernie.) The judge finally revoked his bail and he was taken off to prison. Sentencing will be in mid-June.

Another couple of scam-artists, California Republicans Anthony Vassallo and Kenneth Kenitzer, loved the freedom from financial regulation the Bush Regime afforded them that they donated generously to the RNC and NRCC and to their favorite candidate, Mitt Romney... all the while conducting a ponzi scheme much like Madoff's only smaller. They only ripped off $40 million dollars. I wonder if Romney will return the money they gave him. The SEC filed a lawsuit against them and their firm, Equity Investment Management and Trading Inc., yesterday.

In Greece, one of the European countries hardest hit by the bankster-manipulated Depression, some people have given up on the chances of justice ever catching up with the elite criminal class and have decided to go after Citibank on their own-- in a more direct way. Revolutionary Struggle is bombing Citibank offices. "In the statement, the militant group argued the American bank is part of a 'criminal network of international capital' responsible for the financial crisis." Barney Frank's committee, House Financial Services, is going about the pursuit of justice in a more traditional way. The committee will be holding a hearing next week "to ask key justice officials and regulators what they need to prosecute wrongdoers in the financial crisis." Fortunately, Alan Grayson (D-FL), who was elected by Orlando voters in November to put a stop to financial shenanigans, is on that committee... and outspoken. This evening he told us that "The Bush Administration enforced the law only against people whom it didn't like. As a result, massive fraud went unpunished, to the point where law-abiding people felt like saps. The 'Change We Need' simply is the sense that when someone breaks the law, then he or she will be punished. If people don't have that sense, then we'll soon start to resemble a third-world country."

There is a Difference Between Zero Tolerance For Fraud & Zero Enforcement Of Fraud

Harry Markopolis, the whistle blower who Bush's anti-regulatory SEC ignored when he kept warning them that Bernie Madoff was in the process of stealing $50 billion for investors, told Congress yesterday that there was basically no regulation of the capital markets-- or at least of fraud in the capital markets for the eight years Bush was overseeing the functions of government. Watch Congressman Alan Grayson (D-FL) questioning Mr. Markopolis at a House Financial Services Committee hearing yesterday:



On his blog today former Secretary of Labor Robert Reich explained that Americans actually bought into Obama's campaign message of Change and that now they want it-- and they want the real thing, not the Tom Daschle version, which labors under the false premise that people won't mind corrupt Democrats because they're not nearly as corrupt as corrupt Republicans.

Official Washington underestimated the public's pique at what appeared to be the old ways of Washington. Hill staffers tell me that many offices have been inundated with telephone calls, emails, letters and faxes expressing concern (to put it mildly) about Daschle-- not only his failure to pay back taxes but his relationships with major players in the health care industry and rich consulting contracts with the private sector since leaving the Senate, and even the fact that he was given a car and driver by one of them.

What's going on here? Maybe official Washington, much like most of Wall Street, is still not quite getting it.

Typical Americans are hurting very badly right now. They resent people who appear to be living high off a system dominated by insiders with the right connections. They've become increasingly suspicious of the conflicts of interest, cozy relationships, and payoffs that seem to pervade not only official Washington but our biggest banks and corporations. In short, many Americans who have worked hard, saved as much as they can, bought a home, obeyed the law, and paid every cent of taxes that were due are beginning to feel like chumps. Their jobs are disappearing, their savings are disappearing, their homes are worth far less than they thought they were, their tax bills are as high as ever if not higher.

Meanwhile, people at the top seem to be living far different lives in a different universe. They're the executives and traders on Wall Street who have lived like kings for years off a bubble of their own making while ripping off small investors, the financial louts who are now taking hundreds of billions of taxpayer bailout money while awarding themselves huge bonuses and throwing lavish parties, the corporate CEOs who are earning seven figures while laying off thousands of workers, the billionaire hedge-fund and private-equity managers who are paying a marginal tax rate of 15 percent on what they say are capital gains while people who earn a fraction of that are paying a higher rate, and, not the least, the Washington insiders who have served on the Hill or in an administration and then gone on to pocket millions as lobbyists for the same companies they once regulated or subsidized. To the American who's outside the power centers-- the places of entitlement and I'll-scratch-your-back-while-you-scratch-mine deal making-- the entire system seems rotten.

Markopolis noticed about the SEC exactly what anyone who has given even the most cursory looks at the Bush Regime regulatory agencies-- all of them-- has noticed: "The SEC is... captive to the industry it regulates and is afraid" [to bring big cases against prominent individuals and] is busy protecting the big financial predators from investors."

He attributes it to incompetence rather than to the venality and purposeful mendacity with which the Bush Regime ruled, although he did testify that the securities industry's self-policing organization, the Financial Industry Regulatory Authority, is "very corrupt," which is very disturbing since the head of that outfit is Obama's new SEC chief. She and the holdovers from the Bush Regime are already acting in bad faith and impeding the congressional investigation. They claimed they were restricted in what they could tell Congress. Obama should have called Ms. Schapiro and told her to clean off her desk, but I have no doubt that she is another of Rahm "The Vetter" Emanuel's personal picks.

Mr. Kanjorski, the hearing chairman, condemned that argument as an expression of arrogance that was at the root of the agency’s regulatory failures.

Congress is in the midst of creating regulatory changes that could change the agency’s fate, the congressman warned the panel of official witnesses. Lawmakers want immediate candor about the handling of the Madoff matter, not an “oatmeal” of generalities, he said.

“We didn’t call you up here to hear a traveler’s guide of the S.E.C.,” Mr. Kanjorski added.

Linda Chatman Thomsen, the S.E.C. enforcement director, told lawmakers that the agency staff had demonstrated its willingness and ability to pursue major fraud cases, including 70 Ponzi schemes.

Ms. Thomsen said the agency, under its new chairwoman, Mary L. Schapiro, would work hard to improve its receptiveness and responsiveness to whistle-blowers like Mr. Markopolos.

Her responses did not satisfy any of the half-dozen lawmakers who stayed at the hearing after Mr. Markopolos left. Their attacks were fierce and strident, with Representative Gary L. Ackerman saying at one point: “We thought the enemy was Mr. Madoff. I think it is you.”

The hearing at times seemed to enter verbal territory more often explored at organized crime hearings.

And speaking of organized crime hearings, let's not take our eyes off the ball and look over here when there's something going on over there... and over there.

The first is a continuation of the Justice Department scandals, this particular one featuring retired Senator Pete "Sneaky Pete" Domenici and his role in persuading the Bush Regime to fire David Iglesias, the U.S. attorney for New Mexico. Reading between the lines, it looks like Bush-- or at minimum, Rove-- may have been guilty of obstructing justice.

The federal grand jury is investigating whether Domenici and other political figures attempted to improperly press Iglesias to bring a criminal prosecution against New Mexico Democrats just prior to the 2006 congressional midterm elections, according to legal sources close to the investigation and private attorneys representing officials who prosecutors want to question.  Investigators appear to be scrutinizing Iglesias' firing in the context of whether he was fired in retaliation because Domenici and others believed that he would not manipulate the timing of prosecutions to help Republicans.

The second is another Rahm Emanuel vetting screwup. Turns out the Republican loon Obama picked to be Commerce Secretary for God only knows why was in bed with Abramoff through Kevin Koonce, his legislative director.

[Koonce] was cited in a guilty plea last week by Todd Boulanger, a former deputy to disgraced lobbyist Jack Abramoff. In federal court, Boulanger admitted he plied the staffer with front-row tickets to a hockey game, meals and drinks and other tickets to a baseball game, and in exchange received favors in spending legislation. The total value of the gifts Staffer F took from Boulanger exceeded $10,000, court papers said.

All this corruption-- and they've destroyed the country and are now obstructing the new president from doing anything to clean up their mess!

What Came First, The DeMint Or The Madoff?

These days the worst crooks come from the top layer of society

Lately we've been seeing that corruption is very much a bipartisan affair. Politicians are corrupt. We entrust them with so much and when they violate that trust they should be dealt with very firmly-- and I mean very. Elected officials convicted of corruption shouldn't be eligible for pardons. It drives me crazy that political hacks set their own rules of behavior, including the loopholes that allow them to weasel out of them. Lately the shenanigans of Illinois Governor Blagojevich, New Mexico Governor Richardson and New York Congressman Rangel, all Democrats, have reminded us that it isn't only Republicans who are steeped in self-serving criminality. But today the most extreme right-wing member of the Senate, arch-obstructionist Jim DeMint (R-SC) reconfirms for us that the GOP has been a breeding ground for political corruption for a very long time-- and that they've been doing it very well.

DeMint was fined a paltry $25,000 for taking bribes in the form of campaign donations that exceeded the legal limit. DeMint has sucked up $13,559,622 since he started running for federal office, much of it from corporations whose interests he represents far more than those of working families in South Carolina. Among his biggest donors are plenty of sleazy law firms and lobbyists but also big corporations with business before the Senate, whose business DeMint always backs. Examples are AT&T Inc ($41,250), Fluor ($33,741), Lockheed Martin ($25,750), UPS ($23,250), Morgan Stanley ($22,675), Citigroup ($21,750). He's notorious for massive contributions (a nice way of saying "bribes") from real estate interests ($636,860), Securities & Investment firms ($435,996), his pals in the most corrupt of all American businesses, Insurance ($411,695), Big Oil ($133,588), etc.

After three years of footdragging and evading responsibility, DeMint is busy making excuses for his criminal behavior now, calling it all a great big misunderstanding. The main problem is that one of DeMint's many bribers gave him a "donation" for a bit over the $2,000 legal limit-- actually $68,106 over the limit. Oops.

Behavior like DeMint's has created a permissive atmosphere at the top of society, where the worst criminals, by far, are the wealthiest and most privileged people. The most recent manifestation, of course, is the case of Bernie Madoff, who bilked investors-- many greedy and crooked themselves, looking for ways to avoid capital gains taxes and other legal niceties, like the law against Insider Trading. Yesterday Congress began a "probe," although a farce would be a better description, of the Madoff $50 billion international ponzi scheme.

Ironically, Republicans on the committee, led by far right lunatic fringe ideologues Scott Garrett (R-NJ) and Spencer Baucus (R-AL), are hysterically resisting more regulation aimed at preventing this kind of crooked dealing in the future. Barney Frank (D-MA), the chairman of the House Financial Services Committee has come to the conclusion that SEC field personnel shouldn't be blamed for not uncovering Madoff's scheme, even though a whistleblower raised concerns almost 10 years ago, concerns that were not pursued by the agency's enforcement division. The Democrats want to put more regulation and more law enforcement into place while Republicans, of course, are resisting and trying to place the blame on "bad apples." And so it goes.

Let's hope that the House rules changes implemented today by Nancy Pelosi-- which, despite GOP whining and squawking still allows them to offer amendments, just doesn't let them kill bills on a whim-- will help move bills along that might reinstitute sane regulatory guidelines trashed by Bush and the Republicans, to such disastrous consequences, over the past decade.

'Tis the season for robbing banks, but for NABBING con guys. The Madoff scandal could have caused a nosedive. The reason it didn't isn't much comfort.

"In David Mamet's movie 'House of Games,' the grifter played by Joe Mantegna explains to a former mark, 'It's called a confidence game. Why? Because you give me your confidence? No. Because I give you mine.' So the bankers gave us their confidence, in the form of mortgages and other forms of credit, and we gave them ours. This culture of credulity did plenty of damage to the economy, but now it has given way to something even more corrosive; namely, endemic mistrust."

"Discovering what the crooks have been up to is disillusioning, but not as disillusioning as coming to terms with what the so-called honest people did."

-- James Surowiecki, in "Cheat, Pray, Love," the "Financial
Page" in this week's (January 12) New Yorker

by Ken

SEC Broadens Its Probe Of Failures in Madoff Case

By Zachary A. Goldfarb
Washington Post Staff Writer
Tuesday, January 6, 2009

The inspector general of the Securities and Exchange Commission said yesterday that he is broadening his investigation into the agency's failure to detect the alleged fraud committed by Bernard L. Madoff, examining whether the regulatory breakdown was isolated.

H. David Kotz, the SEC's inspector general, said he is looking to identify not only the officials who failed to uncover Madoff's activities, but also whether the agency is able to "to respond appropriately and effectively to complaints and detect fraud."

Kotz addressed outraged lawmakers on the House Financial Services Committee, who expressed bipartisan agreement that the Madoff scandal underscores the need to restructure the regulatory system.

And now, warns James Surowiecki (whose "Financial Page" has become one of my favorite things in The New Yorker), may be the time to hunt for more Bernie Madoffs:

Along with slashed payrolls, rising foreclosures, and plummeting stock prices, 2008 brought another unwelcome development: a surge in bank robberies, which were up more than fifty per cent in New York. This wasn't shocking: we typically expect property crimes to rise in hard economic times. There is, though, one crime against property which bucks this trend: defrauding investors. On Wall Street, fraudulent schemes tend to thrive during economic booms, and to blow up when times turn tough. While bank robbers are getting busier, the Bernard Madoffs are starting to get caught.

Madoff, says Surowiecki, "is just the latest in a long line of fraudsters who took advantage of investor euphoria. Time and again, as asset markets have become frothier, fraud has flourished," and he provides examples from "England's South Sea Bubble, in 1720," all the way through the last stock-market bubble and the fun and games of Enron, WorldCom, and their crooked kin.

Fraud is a boom-time crime because it feeds on the faith of investors, and during bubbles that faith is overflowing. So while robbing a bank seems to be a demand-driven crime, robbing bank shareholders is all about supply. . . . The same overconfidence that leads investors and lenders to underestimate the risks of legitimate investments also leads them to underestimate the likelihood of fraud. In Madoff's case, for instance, his propensity for delivering inexplicably consistent returns month after month should have been a warning sign to his investors. But in the past few years besotted investors were willing to believe lots of foolish things -- like the idea that housing prices would just keep going up.

Of course this can't go on forever, and "when the crash comes, and people get more cynical and cautious, the frauds are exposed." Surowiecki quotes Warren Buffett: "You only learn who's been swimming naked when the tide goes out.”

Did the share prices of Enron and WorldCom start plunging after their fraudulent actions came to light? Actually, it was the other way around: the financial mischief was exposed only after their stock prices tanked. In Madoff's case, the steep across-the-board decline in asset prices curbed investors' appetite for risk, so that many started to pull their money out. That effect may very well have forced Madoff to dispense more money than he could keep bringing in, especially since recruiting new investors, which you have to do to keep a Ponzi scheme going, would have become harder after the crash.

There is one small saving grace. With the unmasking of an investor ripoff on the scale of our Bernie's, there is a normal expectation of a sizable jolt to general investor confidence, and that didn't happen.

But the reason why it didn't happen isn't such good news. Surowiecki notes a couple of contributing factors:

* "A stock market that lost seven trillion dollars in value in 2008 knows how to take a fifty-billion-dollar loss in stride."

* "Madoff was running money largely for an élite clientele, which gained access to his services primarily through inside connections, limiting the market-wide impact of his malfeasance."

But the main reason that Madoff didn't destroy investor confidence is that it was already gone, thanks to a year when just about every institution that the market depends on -- rating agencies, accounting firms, regulators, Wall Street C.E.O.s. -- had messed up. The whole web of intermediaries and knowledge brokers that modern asset markets have come to rely on has become frayed. That helps explain the current credit crunch -- bank lending has dropped fifty-five per cent this year -- and the dismal state of the stock market. Discovering what the crooks have been up to is disillusioning, but not as disillusioning as coming to terms with what the so-called honest people did.

"If there's one thing worse than too much confidence," Surowiecki concludes, "it's not enough. Fraud impoverishes a few; fear impoverishes the many. As long as mistrust prevails, people will keeping pulling money out of the system -- sometimes even at gunpoint."

#

Madoff Violates Parole-- Caught Stashing Away A Million Dollars In Valuables

Earlier today we suggested that perhaps if wealthy corporate criminals who steal, say $50 billion, were dealt with the same way the low grade street criminals are treated, maybe there would be less corporate criminals preying on society. I don't expect anyone to be as enthusiastic about the use of the death penalty for the Enron and Madoff types as I am but I was happy to see that when Madoff was caught sending at least a million dollars in jewels away-- clearly to evade an injunction freezing his assets-- the government decided maybe he actually should be in jail after all, instead of under house arrest in the palatial $7 million Manhattan apartment he bought with money he's been bilking out of investors.

Madoff disposed of five items including “very valuable jewelry,” Assistant U.S. Attorney Marc Litt said today in Manhattan federal court. The government has three of the items, Litt told U.S. Magistrate Judge Ronald Ellis. Defense lawyer Ira Sorkin said the objects, including watches and cuff links, were heirlooms innocently sent to Madoff’s relatives. Sorkin said he told his client to retrieve them and alerted the government.

...At today’s bail hearing, Litt argued the mailing of the valuables by Madoff and his wife Ruth began Dec. 24, violating an agreement to freeze his assets as part of a Securities and Exchange Commission lawsuit.

“The bail conditions that were originally set by this court haven’t been violated one iota,” Sorkin responded in court, adding that he learned of the government revocation bid today.

Litt argued that the dispersal of the valuables constituted a risk to investors and the public that justified imprisonment before trial. He said that the likelihood that Madoff would be eventually imprisoned increased his risk of flight.

“The case against the defendant is strong, and it’s getting stronger,” the prosecutor said, making it more likely Madoff will flee. The transfer was an “obstruction of justice.”

It's beyond belief to me that a cold blooded predator who steals $50 billion and jeopardizes scores of banks, charities, schools and businesses is allowed to relax in his luxurious home while the poor man who, proverbially, steals a loaf of bread to feed his starving family is tossed in jail. It's another example of the wealthy taking care of their own. America has become so corrupt and out of whack that it sometimes appears to be approaching the point where nothing will save it from what it has become. And who is investigating him in Congress? A committee led by an ethically-challenged crooked congressman, Paul Kanjorski.

How Much Of Your Money Do You Want To Give To The Poor Millionaires Who Were Greedy Enough To Fall For Bernie Madoff's Siren Song?

Instead of a bailout, how about the death penalty?

At one time Bush and Cheney were calling their program for fleecing America The Ownership Society. A more accurate moniker would have been The Entitlement Society. But the latest manifestation of the Bush world view is the demands that Bernie Madoff investors-- all millionaires and billionaires-- are making on the rest of us to make them whole. And why not? It fits right in with the whole Bush Economic Miracle that has virtually destroyed the American working class painstakingly built up since the early 1930s.

Yesterday's Guardian reports that taxpayers are already on the hook bailing out Madoff's rich (and formerly rich) investors and that they're complaining that more taxpayer funds are needed.

Lawyers representing the victims of Bernard Madoff's alleged $50bn fraud are calling on the US government to bail them out with billions of taxpayers' dollars.

They say the government should bolster the Securities Investor Protection Corporation, which helps creditors of collapsed brokerages.

The SIPC has little more than $1.6bn of funds and has promised $500,000 to each Madoff victim who had an account with his firm in the past 12 months. Losses in the Madoff affair are estimated to be between $30bn and $50bn. Michael Sirota, a lawyer representing KML Investments, a firm claiming to have lost $80m, said: "What if SIPC needs $15bn to compensate all the victims because this fraud is bigger than anything they imagined could happen? The government should step up with funds like it has for the banking sector and the automotive sector."

This, of course, fits in perfectly with the Bush Regime's vision of financial policy and economics in general: Privatize the profits; socialize the losses. That's George W. Bush's idea of the "free market."

I'm sorry Madoff's clients lost $50 billion. They should have been more careful about the risks they were taking in their lust for greater rewards. It's the first rule of investing. Perhaps they thought they were getting away with insider trading and offshore banking shuffleboard to evade capital gains taxes. And they expect hardworking Americans to subsidize this?

Between 1950 and 2006 (56 years), the S&P 500 moved either up or down by more than 5% during a trading day exactly 34 times. Last year (2008), that happened 44 times, half of them since October 1. That's what you call volatility. Volatility is risky. Take big risks and one of two things happen-- you make a fortune or you lose a fortune. You think Madoff's investors planned to hand outsized profits off to the American taxpayers if things had worked out the way they planned? No, neither do I. But they now claim we should cover their recklessness.

SIPC does not have enough money to pay out all the claims that are sure to come from one of the biggest fraud cases to ever hit Wall Street. Securities attorneys say the organization has a reputation of being tough to squeeze money from, and each investor is only entitled to a maximum payout of $500,000 if a claim is approved.

SIPC officials say the books of Bernard L. Madoff Investment Securities LLC are in complete disarray and could take six months or more to piece together. With bills piling up and her bank account vanishing, the one thing Ambrosino and others caught in the alleged $50 billion fraud don't have is time.

...The government created SIPC in 1970 to reimburse investors duped by brokerages in areas such as unauthorized trading or theft. SIPC is set up to cover losses of up to $500,000, and $100,000 of that amount can be claims for cash holdings that were lost.

The scope of what SIPC covers, however, can be limited. SIPC, for example, typically won't cover claims for cases involving stock manipulation or investments made into hedge funds.

How about we all take a pledge to vote against every elected official who votes in favor of spending taxpayer dollars to bailout these people?

Somehow Ken forgot to post this on December 24 while I was in Bandgiagara and Sangha. It still works: