On Messier Madoff and Ponzi
Last week Obama delivered two speeches, the first in Cairo, directed at the Moslems of the world, the second, a day later, in Buchenwald Germany, with Elie Wiesel at his side. I assume this was directed to allies of Israel and the Jews -- it was an obvious counterpoint to the previous day, a fact not lost on me and on many journalists who decided to be honest with their readers.
This caused to me much anger and I spilt out my guts and wrote a very long piece. I posted it on this site. I think it took me longer to write than anything I have previously composed, and I felt good about having penned what I wanted to say. My kishkes were clear.
Peter, of the Boy Downstairs fame, rang from Sydney the next day to tell me that I had said too much, and as a result, had said nothing. In Rugby, he said, there's a rule, keep your eye on the ball, not the player [carrying it]. I had broken that rule. After rereading that which I had reread more than once, I decided his criticism was constructive, correct. So I rewrote. (I still have the original, but haven't decided whether I should provide a link to it.)
Peter agreed in the main with my positions on Obama, but felt I was a bit harsh on Elie Wiesel. I also included a critique of people, including the perhaps unwitting Wiesel, who were sucked into Bernard Madoff's investment scheme.
And to round out my lengthy soliloquy, I added my personal reaction to, like Peter, being a second generation Holocaust survivor. It is a tough burden to carry and I think, effects many of my thoughts and reactions. This issue certainly relates to Wiesel, but not to Madoff nor (directly) to Obama.
As my rewrite cut out a lot from the original, I have enough material on the cutting floor for at least two more articles.
The following is basically what I originally wrote about Wiesel's Madoff relationship, though essentially it is not directed at Wiesel personally.
I stated that I am supposed to feel sorry for Elie now, not because of his relationship juxtapositing Obama, but because he blew his money on Bernard Madoff's ponzi scheme. The scheme was a device whereby new investors provided the capital to pay old investors 10+% annual interest. Elie Wiesel's "Foundation for Humanity" had $15.2 million being "looked after" by Uncle Bernie at the end.
But all of the old investors in Madoff's company were very well paid for years. They continually received interest rates well above market rates. Their greed was their continuance with his firm, and until the final plunge into the abyss, their greed was very well rewarded.
Had you invested ten million dollars with Madoff and received say 8% above bank rates, in thirteen years you "earned" back your principal, your ten million smakkeroonies -- you doubled your money -- and still made "bank interest". In other words, when Madoff's fifty or sixty billion of "capital" went down the gurgler, you lost nothing -- your "interest" payments more than covered your initial capital -- you received back your full capital of $10,000,000 over the thirteen years, and a lot more to boot. And the return period was probably less then 13 years.
Some people had money invested with Madoff for over thirty years. Of course, to make the whole enterprise work, some only had it there for just thirty days -- and these are the real losers I suppose -- big time.
I also do admit that even if you had a long-term investment, and earned your money back multiple times, you now have an unexpected cash flow problem, but surely that's a reasonable expense for unbridled greed. The fact that you already spent your $1,000,000 and more each year from your earnings was your choice. You could have chosen save it elsewhere. But your greed probably would have lead you to give Madoff even more.
Now you tell me you want your cake and you want to eat it too. Tough. You already ate it. That's not how the real world works. Were you really present in the real world, you would have thought many times over about how it is that, since Ponzi's return to Italy, no-one has continuously managed to pay out these returns. But you slept well at night. You all slept very, very well, form many, many years.
I bet Madoff even had a clause somewhere in his agreement that he doesn't "guarantee" the return "suggested in the prospectus". The honest brokers certainly did. You may have had to read all thirteen pages of the fine print.
There was more than just greed at play here. There was also another key vice -- laziness. There was a sixty-five year old French investment banker, Rene-Thierry Magon de la Villehuchet, who had some 1.4 billion dollars reinvested (was it that much) with Madoff. He took money from lots of people -- investors -- and promised them a great return on their investment. Instead of spreading the money around amongst different strategies, he simply gave it all to Uncle Bernie to "look after". Of course, while money was coming in, he was creaming off whatever he felt was a fair reward for his "hard" work. He had built up a good, justifiably earned, reputation over the years. But then he got lazy. And along came Bernie. Of course he could have told his investors to go directly to Bernie for a couple of extra percent return. But he chose not to.
Now tell me what this was if not unbridled greed and unconstrained laziness. He ended up comitting suicide by slashing his wrists sitting at his desk.
He was actually the only one I heard off that took his own life. In the 1929, brokers were jumping out of windows at the New York stock exchange. This time around, even when demonstrators stood outside the exchange with signs saying, "Jump you bastards", no-one complied. Ah, the French have always been more chivalrous than their American counterparts.
Now, the American money authorities, the same regulators who failed to "notice" Mr Madoff's "interesting" business dealings, want the money back. The sixty billion that vanished into Shakespeare's thin air, or as the BBC put it, disappeared into "money heaven". And they are taking the attitude that those who continually received these high returns could not have assumed that this was a "straight" deal. The son of one of the long term investors was quoted by Fox as saying, "The one thing he [his father] said about Bernie (was), 'If there's one honorable person, it's Bernie.'"
Not so say the authorities. And legal proceddings have started legal proceedings to recover the missing cash.
Many of the "losers" are, like Elie, charities, some doing very interesting and important work. And many (probably most) are Jewish (related).
Mr Wiesel and our other friends -- I believe it's time to come home.
Menachem Kuchar, 13th June, 2009
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