After Madoff

The catharsis of Bernie Madoff's sentence was short lived. It didn't take long for the victims to swing into action, commenting on every news article about Ruth Madoff or their sons that they too should be put into prison. But really, what is going on here, according to Frank Rich's fabulous op-ed piece in the 5 July 2009 New York Times, is that we are hungering for something to be done to the wizards of Wall Street who keep gyrating the world's economy and particularly ours, through these boom and busts.

Yet, nothing happens. In fact, banks and financial institutions have increased their lobbying capacities in Washington, DC, watering down any possible legislation that may regulate their secretive and outlandish practices. Meanwhile, in anticipation of even the minor tweaking the Obama Administration has done to these institutions, banks are raising rates on credit cards, fees for accounts, and even the privilege to withdraw your own money. Think about that. You have to pay to get your money!

Henry Blodget, a former securities analyst on Wall Street, made millions during the last bubble induced by the financial industry, the dot.com era. His analysis caused stock brokers to recommend a feeding frenzy for small start ups, and when the dust settled and there was no "there there," Blodget was charged by the New York Attorney General for stock manipulation because he, among other stock analysts, didn't believe in the hype they were selling. He settled the civil case. However, the irony is, Henry Blodget is a talk-head analyst for NPR. NPR! Explaining how the financial industry is creating bubbles, again!

It seems we can not quite clean our closets. The next thing you know we'll have Enron executives on NPR giving us advice on how to speculate on commodities.

So it seems that as each day passes from the Obama inauguration, nothing happens to prevent these kinds of bubbles from happening again. Frank Rich is right, we would probably cheer for a John Dillinger these days, just as much as people did in the 1930s. Someone who had the guts to take it to the banks just as much as the banks and financial industry continue to take it to us.

Another article which demonstrates that nothing has changed is a fascinating account of how Goldman Sachs has been at the bottom of every bubble we have recently experienced. Yet the company and their executives (the roll call of former Goldman Sachs execuitves who have gone on into powerful government positions is breathtaking: Jon Corzine, Governor of New Jersey and former US Senator, Robert Rubin and Henry Paulson, Secretaries of Treasury...). Why would we regulate a cash cow for the powerful?

Ever get that sinking feeling that nothing will change? Remember, unemployment is rising, foreclosures are rising, your bank is charging you more for less....

150 Years?

Wow. I thought we were a country of compassionate people. Wrong. To read the victim's statements much less what the judge said in his sentencing ruling we seem to be similar to some sort of Islamic justice system. Not only did we sentence this man to three times his life expectancy if he'd committed his crime in his prime, but we yelled humiliations at him. What the heck does that get us?

And for deterrence to other Ponzi scheme or corporate crime? Well, most of those guys are now booking flights to countries without extradition treaties. Why bother confessing?

In the federal system, even if his sentence was 12 years, he would still have to serve 85% of his time. That's a lot of time for a 70 year old man.

So remind me, what was the point of this sentence? Oh, I know, we are into vengeance. And that's good because....?

Wealth, Greed, and Punishment

There were two interesting articles in the New York Times yesterday. One about Ruth Madoff (oddly, the article was placed in the Style Section) and how vendors, restaurants, and even her hairdresser have shunned her since her husband's arrest and subsequent guilty plea. Although she has not even been questioned by the US Attorney's office, "the street" belief is that she is as guilty as her husband, or at least, seemed to enjoy spending the "ill gotten" gains as much as he did. So New York restaurants, Hamptons florists, and her upper east side hairdresser have all asked her to disappear, to not patronize them.

Her hairdresser, with whom she loyally went to every six weeks for dozens of years, said that he knew people who lost "millions." Same thing with the florist. And the restaurants didn't want other patrons to leave if she showed up.

As the Madoff story continues to unfold, it is becoming clear that most if not all the investors will recover their principal. In other words, the amounts they gave Bernie Madoff to invest. What they "lost" was the unrealistic profits he promised them. The gains.

So here is this woman, not guilty of anything, being punished for something her husband did. And because, according to the article, she is not playing the public relations game. It's ironic, isn't it, that the people who sought Madoff's investments did so because he made them think they were getting something exclusive, something for only a few people. The peons were not able to get these massive returns. Yet when it all fell apart, these investors still have not learned a lesson about humility. They still seek exclusivity. God forbid that they get their hair cut next to someone who is married to a felon! Or show some empathy. Or compassion. Or even loyalty to someone who was loyal to them. But then, those very same "triggers" are what made Madoff so successful, he played into the emotions that these investors continue to have.

The second article was about the Yellowstone Club. I have talked about this place in previous posts. An exclusive club in Montana where just to join you have to have something like 5 million in liquid assets. It advertised itself as a place where the rich could "check their egos at the door." Well, clearly that never happened. The owners of the club, Tim and Edra Blixith, made and lost several fortunes, but finally figured out, like Bernie Madoff, that appealing to the need of the rich to run with the rich could make them money.

Now, of course, the Yellowstone Club is in bankruptcy, as is Edra Blixith who is divorced from Tim. The Blixiths took the Club and leveraged it for over 300 million, using much of that money not to improve the Club, but rather to buy all sorts of things for themselves and a failed "swanky" time share idea further enabling the really wealthy to stay away from the rest of us.

It now appears, like the Madoffs, that the Blixith's new occupations are responding the lawsuits.

There are dozens of morals in both of these stories. Hopefully we begin to look at our seemingly insatiable need for money and more money as an illness rather than something to celebrate. That we begin to really examine how we got into this age of greed not as a "fad" of self examination as we read our new subscription to Living Simply, but really as a means to understand how unhealthy this past decade or so has been for us, the planet, and our future. And maybe Rith Madoff's hairdresser can find it in himself to just cut her hair.

On Greed

This morning, 12 adults, from a female fire fighter to a international banker, sat in front of a elementary school student body to explain what they do for a living.  There was a woman, trained as a hair stylist who founded a children's theatre, a camera man for documentaries seen on The Discovery Channel, a chef who opened his own oven roasted pizza restaurant after being an elementary school teacher, an architect designing affordable housing, a immunologist, a forester (me!), and a director of operas.  Each person spoke passionately about following the things in life that make you happy.  About giving to the community.  Not one student asked about how much money we made (although one precocious child asked if I got to shoot wild animals!).

And so, on this day, when Bernie Madoff was shackled and taken to a Federal Detention Center in Manhattan, when his victims cheered and clapped when he was hauled away, this piece by Tim Egan, says it all.   

I met Patsy Collins (referenced in the article) and worked with Bill Gates, Sr.  Both were and are amazing people.  We have a lot to learn from folks who understand commitment to community, family, and that following your passion is far more important that how much money you can make.  Greed was prevalent throughout our society, especially the past few years.  We're all in the mess together.  And it will take all of us to get us out of it.

Now, now it the time for us, in Patsy Collin's words, to "give forward."