International Law

How did Madoff get Away with it?

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Megan Mcardle writing at the Atlantic, asks "How Did Madoff get Away with It?

"The preferred explanation of many of my interlocutors, that this was somehow a result of Bush's deregulatory mania, won't do, and not just because there's not really all that much evidence of Bush's financial deregulatory mania. 

Tax cuts and financial regulation, however tightly coupled they may be in your mind, are neither substitutes nor complements.

Madoff's activities were not the sort of gray-area thing that might be slipped in among a newly lax attitude towards SPEs and SIVs.  It's straight out old fashioned fraud, of the sort that no one, no matter how keen they are on deregulation, thought was okay. 

The SEC did not give a pass to Madoff because Bush, or anyone else, had told them to go easier on Ponzi schemes..

Somehow, even though everyone agreed that this was the sort of thing the SEC should be aggressively rooting out, and the SEC has perfectly adequate resources to investigate high-profile fraud at a 20-person operation, the SEC dropped the ball so hard it's probably even now still falling through the Earth's mantle towards China..

The market failed as badly as the government.  The people he bilked weren't unsophisticated consumers of the sort that we assume need regulatory protection.  They were extremely rich people, many of them with backgrounds in finance."

Regulators are not in the business of protecting you from fraud: they are in the business of cleaning up, using your money to do so, and saying "I told you so."

The amounts paid to government appointed receiver's dwarf the restitution to the investors or purchasers.

Buy real due diligence from seasoned, experienced professionals.

Be prepared to spend real money to avoid a large loss, and public humiliation. Or remain a mark. Your choice.

Full post as published by Misleading Advertising Law on December 17, 2008 (boomark / email).