Damn It Feels Good To Catch A Banker

I recently finished this book with cleverly titled chapters such as
"It's all about the bonuses, baby"
"Geogetown? I wouldn't let my maids' kids go there"
and
"This is how we do it on Broad & Wall, Bitch!"
It is a very amusing parody of the culture of Wall Street, from investment banking to private equity to hedge funds. But like in any parody, there is a kernel of truth, especially when it comes to the arrogance required to be successful.
And a step away from this kind of arrogance is the hubris that leads to this.

Money managers accused of $550 million fraud

NEW YORK (Reuters) – Two money managers who oversaw investments for Carnegie Mellon University and other institutions were arrested on Wednesday on charges of running an estimated $550 million, decade-long swindle, the latest in a wave of big financial fraud cases.

The pair, both former part-owners of the New York Islanders National Hockey League team, are accused of using client money as "their personal piggy-bank" to fund lavish lifestyles, according to the U.S. Securities and Exchange Commission.

Authorities contend the scheme began in 1996 and operated through this month. Of the $667 million that clients invested, Greenwood and Walsh misused as much as $554 million, the SEC said.
Greenwood, of North Salem, New York, was accused of using investor funds to buy items including horses and expensive collectibles, while Walsh, of Sands Point, New York, was accused of using client money for himself and to make large payments to his ex-wife.

Hubris indeed. Madoff was only the beginning...how many more of these guys are going to get caught?

Purely Pathological - More On Madoff

OK so much for that New Year's resolution.
I can't help but have righteous indignation when I read the news about Bernard Madoff.
Yeah, I know, I wasn't an accredited investor who had money with this creep. But I'm still pissed off that he knowingly screwed over so many people and philanthropic organizations. And he got away with it for so long.
And I'm pissed off that at least one honorable man commit suicide over his clients' losses from the ponzi scheme while Madoff continues to live in his Manhattan flat and break the law by defying court orders.

From Bloomberg
Madoff Sons Told Prosecutors of Jewelry, Lawyer Says

Madoff mailed five packages of items, including “some very valuable jewelry,” after his assets were frozen by a judge in a related civil lawsuit, said Assistant U.S. Attorney Marc Litt in court today. Defense lawyer Ira Sorkin said the objects, which included pens and $25 cuff links, were heirlooms innocently sent to Madoff’s children and brother, Peter.

I don't care if the jewelry was worth $50 or $50,000, there was a freeze on all of his assets and this guy needs to be in jail

now

Beyond Brazenness - Blagojevich, Madoff and More

From Meghan McArdle in The Atlantic
L'audace, l'audace, toujours l'audace!
16 Dec 2008 02:33 pm

I've made this the comment of the week, because it's exactly right:


The SEC is very good at rooting out sophisticated fraud, especially in accounting gimicks. But they, like most human beings, are simply not that good at identifying accounting statements that are simply made up out of whole cloth. Hindsight is 20-20 though and I'm sure plenty of people will be calling for heads to roll.


The brazenness of the fraud was, in some part, the reason it was easy to keep going. The SEC is looking for people pushing the envelope. It is not looking for people who have set fire to the envelope and substituted a piece of old newspaper recently used to wrap fish.

It's actually easier for someone committing outright fraud to slide under the SEC wire, because when you're making up financial statements out of whole cloth, it's not hard to make them conform to SEC regulations. Similarly, Stephen Glass and Jayson Blair and Jack Kelley were able to get away with their frauds precisely because they fabricated things out of whole cloth. If you misquote an actual person, or misreport something that really happened, there's a strong risk that you'll be caught. But manufactured sources never complain that you spelled their name wrong or twisted their words.

In the long run, of course, such fraud guarantees that you'll be caught. But as Madoff shows, the long run can be long enough for someone entering old age to hope to beat the law of averages, Keynes-style.

On a somewhat related tangent, here's the question that really bothers me about Blagojevich: what if the reason that he thought he could get away with it is that a lot of other politicians he knows about have?