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Old 12-26-2008, 12:01 PM   #21
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Also, the Madoff scheme was widely believed to be illegal - possibly some kind of insider trading - so a bail out would be rewarding those who mostly believed they were skirting the law, if not outright breaking it. Rewarding those who knowingly participated in a shady deal, while penalizing those who avoid lawbreaking would be a bad precedent indeed.

So on top of getting lower rates, the CD investors would also subsidize Madoff investors who tried to cheat the system with what they believed to be an illegal scheme, but hopefully not too illegal so they wouldn't get caught. Too bad they got caught, although not the way they expected.
Kind of a bogus argument since we now know that it was a Ponzi scheme and so NOT illegal inside trading.... and there were NO gains at all, just made up numbers...

What will be interesting is how much money is left and how much they get out of him and his family.... I think he should lose ALL he owns... and it appears his sons were involved and they should lose all they own... but I doubt it will happen... they will spend it on lawyers to try and keep them out of jail..
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Old 12-26-2008, 12:40 PM   #22
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Kind of a bogus argument since we now know that it was a Ponzi scheme and so NOT illegal inside trading....
I do not understand why you believe this argument to be bogus.

Here's an "investment" plan that (nudge, nudge, wink, wink) will earn you money in good times and bad and with the excellent insider connections of the partners, will likely never be prosecuted. It's technically illegal, but since it's the investment manager doing it, you should be safe.

If you invested money in such a scheme to get higher returns, why should people who avoided such chicanery bail you out? We do not normally use tax money to reimburse victims of fraud. We do not normally use tax money to reimburse greedy victims of con artists. We do not normally use tax money to reimburse people who invest in fradulent tax xhelters. We do not normally use tax money to reimburse people who fail at criminal enterprises. There are many more examples.

There is an issue with Moral Hazard here. If anyone attempting to skirt the laws is guaranteed to be made whole, then there is strong incentive to seek out and invest in such questionable schemes - indeed there is a strong reason NOT to invest in lesser performing, but known to be legal, investments.

The investors thought they were cheating, but getting away with it. In fact it turned out that the investment manager was cheating the investors. Why should they get any more sympathy than others with legitimate losing investments? In fact, they thought they were cheating. Why should they get any sympathy at all?
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Old 12-26-2008, 02:03 PM   #23
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There is an issue with Moral Hazard here.
If there were no moral hazard, our government would not be interested.
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Old 12-26-2008, 09:56 PM   #24
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Who thinks Bernie Madoff is the only guy running this type of scam?




Who thinks we are going to see a number of individuals and companies involved in similar chicanery dragged out into the light as the economy continues to tank?


Of the many things he's done, Bernie has done grievous injury to trust as an important component of financial transactions. At least some investors are going to be demanding much more in the way of documentation before they take any more fliers with any investment opportunities, be they ordinary private investors up to mighty corporations.

I don't, for instance, think the goal of thawing out the credit markets has been advanced by Mr. M's antics.
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Old 12-27-2008, 01:06 AM   #25
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I do not understand why you believe this argument to be bogus.

Here's an "investment" plan that (nudge, nudge, wink, wink) will earn you money in good times and bad and with the excellent insider connections of the partners, will likely never be prosecuted. It's technically illegal, but since it's the investment manager doing it, you should be safe.

If you invested money in such a scheme to get higher returns, why should people who avoided such chicanery bail you out? We do not normally use tax money to reimburse victims of fraud. We do not normally use tax money to reimburse greedy victims of con artists. We do not normally use tax money to reimburse people who invest in fradulent tax xhelters. We do not normally use tax money to reimburse people who fail at criminal enterprises. There are many more examples.

There is an issue with Moral Hazard here. If anyone attempting to skirt the laws is guaranteed to be made whole, then there is strong incentive to seek out and invest in such questionable schemes - indeed there is a strong reason NOT to invest in lesser performing, but known to be legal, investments.

The investors thought they were cheating, but getting away with it. In fact it turned out that the investment manager was cheating the investors. Why should they get any more sympathy than others with legitimate losing investments? In fact, they thought they were cheating. Why should they get any sympathy at all?

I say it is bogus since we now know there was no insider trading... no 'illegal' trades going on that we could not get..

Since the basis of the argument is that you might be getting extra return because he was doing illegal insider trading... but you were not getting this extra return by illegal insider trading.. bogus argument... there was an article where this guy had been saying there was no way for the kind of returns that were happening for years... but he was ignored... even if it was illegal insider trading... and I will ask where was it 'known' that he was making these returns because he was doing so illegally It is not illegal to pick winners all the time... you have to have insider information and trade on it to be illegal.. and to tell the truth, if this is what he had done there would be a lot of money to pay everyone because he would have earned it...

I don't give them any sympathy... I don't know anyone who does... to me, a hedge fund is a very risky investment even if it was legal... there have been many who lose almost everything in a bad year... so if they want to invest this way with 100% of their money... then they deserve what they got...
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Old 12-27-2008, 09:18 AM   #26
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I say it is bogus since we now know there was no insider trading... no 'illegal' trades going on that we could not get..
The guy was running an "investment" scheme that was questionable at best, and most investors got involved because they believed they were skirting the law. Yes, even the charities. It now turns out that one thing he didn't do was insider trading, because his fraud was bigger than that - he didn't do any trading. It looks more like an affinity group Ponzi scheme on an unbelievably massive scale. But still a con.

So how does that change that the investors were trying to get away with something outside the law?

So how does that change whether the investors should be protected by government insurance?

Maybe it doesn't matter to you that the investors TRIED to cheat, because they were thwarted in doing so by the larger con that Madoff was running. I see this as different from what the SIPC was set up to protect and I hope there is no bailout.
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Old 12-27-2008, 09:32 AM   #27
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...because they believed they were skirting the law...
This is the part I think is a bit weak. Which investors thought they were skirting the law?
Sure, lots of people are now saying that the returns were 'too good to be true'. But that speaks of gullibility more to me than thoughts of skirting the law.
Is there anything that supports your supposition that the investors thought they were 'skirting the law'?
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Old 12-27-2008, 10:05 AM   #28
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I cite The Economist, but there are many many other similar reports:

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According to reports, some of those who put their faith in Mr Madoff suspected that he was engaged in wrongdoing, but not the sort that would endanger their money. They thought he might be trading illegally for their benefit on information gleaned by a separate business within his group, which made a market in shares. The firm had been investigated for “front-running”, using information about client orders to trade for its own account before filling those orders.
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Old 12-27-2008, 02:03 PM   #29
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Thank you, I do appreciate that as I had not heard anyone mention that aspect yet.
Did the Economist mention which reports they are referring to (in their 'According to reports' statement)?
I don't think we should throw all investors to the dogs, because some thought wrongdoing was involved. I think there are plenty of other reasons the government shouldn't be bailing out investors. But that isn't one of them
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Old 12-28-2008, 01:48 PM   #30
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It's one thing to throw the investors who dealt with Madoff directly under the bus, but what about those folks who entrusted their assets to Fund of Fund managers who decided to invest with Madoff and not tell his/her clients! Them I can feel sorry for.
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Old 12-28-2008, 02:31 PM   #31
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I have heard that most successful con artists play on the greed of their "marks". Think of those who fall for the Nigerian money transfer scam or the old "money in the sack" trick. In both cases, the victims are less than honest themselves.

JAB1950 does have a good point about the people who did not even know they were invested with Madoff.
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Old 01-05-2009, 07:01 PM   #32
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Madoff has now been caught sending $1 Million worth of watches, jewelry and other heirlooms to his brother, sons and daughter-in-law even after he is was freed on criminal bond. Did the judge who granted him bond think he'd suddenly become honest?



Prosecutors Seek Detention of Madoff - WSJ.com
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Old 01-05-2009, 09:10 PM   #33
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Madoff has now been caught sending $1 Million worth of watches, jewelry and other heirlooms to his brother, sons and daughter-in-law even after he is was freed on criminal bond. Did the judge who granted him bond think he'd suddenly become honest?



Prosecutors Seek Detention of Madoff - WSJ.com
Ouch. I'll bet Bernie's lawyers wish he and his wife hadn't tried this stunt. After all, he's only supposed to be transferring assets to their pockets.

It's time for Bernie to make some new friends in jail. They'll like Bernie there.
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Old 01-05-2009, 11:59 PM   #34
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Ouch. I'll bet Bernie's lawyers wish he and his wife hadn't tried this stunt. After all, he's only supposed to be transferring assets to their pockets.

It's time for Bernie to make some new friends in jail. They'll like Bernie there.
Perhaps he should share a cell with the judge who granted him bond.
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Old 01-06-2009, 05:10 PM   #35
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Even if you were a more fortunate ex-Madoff investor who bailed out before the mushy hit the fan, you may still have to cough it back up, due to a "pain sharing" process known as "clawback".
The managers of the Fort Worth Employees' Retirement Fund thought they had dodged a bullet when Bernard L. Madoff was arrested on Dec. 11 for alleged fraud. Just a few months earlier the $1.7 billion public pension plan had pulled $10 million out of a hedge fund that invested exclusively with Madoff. But now the managers face the possibility of having to give back the money—a sum that includes all of the pension's purported gains over the years plus its initial investment.

The Fort Worth plan and other Madoff investors who got out before the operation imploded may yet be snared by the bankruptcy proceedings. Under federal law, the trustee in the case can sue former investors to force them to return their profits and principal, a process known as a clawback. The legal theory is that investors who stick around to the bitter end shouldn't bear all the pain.
The Madoff Case Could Reel in Former Investors - BusinessWeek
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Old 01-06-2009, 06:45 PM   #36
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Last night on CNBC's "On The Money" show with Carmen Wong Ulrich, she interviewed a psychologist, Stephen Greenspan, who had lost $400,000 with Madoff. He had just published his new book when the Madoff thing was announced.

His book is called "Annals of Gullibility - Why We Get Duped and How To Avoid It".
Amazon.com: Annals of Gullibility: Why We Get Duped and How to Avoid It: Stephen Greenspan: Books

Stephen Greenspan, PhD: Exploring and facilitating human competence

He comments on his personal situation here -
Fooled by Ponzi (and Madoff)
How Bernard Madoff Made Off with My Money


Skeptic: eSkeptic: Tuesday, December 23rd, 2008
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Old 01-06-2009, 07:09 PM   #37
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The Professor got duped. Ouch.

"I genuinely liked and trusted this man [the FA and friend of his sisters], and was persuaded by his claim that he had put all of his own (very substantial) assets in the fund, and had even refinanced his house and placed all of the proceeds in the fund."
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Old 01-08-2009, 02:15 PM   #38
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Last night on CNBC's "On The Money" show with Carmen Wong Ulrich, she interviewed a psychologist, Stephen Greenspan, who had lost $400,000 with Madoff. He had just published his new book when the Madoff thing was announced.

His book is called "Annals of Gullibility - Why We Get Duped and How To Avoid It".
Amazon.com: Annals of Gullibility: Why We Get Duped and How to Avoid It: Stephen Greenspan: Books

Stephen Greenspan, PhD: Exploring and facilitating human competence

He comments on his personal situation here -
Fooled by Ponzi (and Madoff)
How Bernard Madoff Made Off with My Money

Skeptic: eSkeptic: Tuesday, December 23rd, 2008
This is the best story yet. Similar to the kidnapping expert who got kidnapped in Mexico.

For the most part I am agnostic about the Madoff losers. It would be nice if there were no fraud, but realistically has there ever been no fraud? So 2nd best is to have people be reminded to look out for themselves.

Here is a slide show of prominant losers- an interesting aspect I hadn't known about is how many large banks got taken. Very bad news here. What are banks doing making this kind of investment? Aren't they supposed to be out making bad loans?

The suicides, etc. should get the point home. Any sort of bailout would short-circuit the learning op.

Madoff Was Ready to Send Out $173M - AOL Money & Finance

Madoff should get back in jail now, and he should get a very long sentence. The death penalty might be about right.

Ha
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Old 01-08-2009, 02:39 PM   #39
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Looks like the feds got to him just in time. I bet each one of those 100 folks are pissed off that "the checks were not on the mail."
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Prosecutors arguing that alleged $50 billion scammer Bernard Madoff should be put in jail immediately say that when Madoff's desk was searched following his arrest, investigators found approximately 100 signed checks totaling more than $173 million "ready to be sent out".
ABC News: Feds: Madoff Had Millions in Checks Ready to Go Out
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Old 01-09-2009, 03:13 PM   #40
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I would never trust my portfolio to one single person or firm.
The vast majority of my portfolio is invested in Vanguard index funds, either directly through Vanguard, or indirectly through my Fidelity 401(k). Most of the remainder is in US Treasuries via the Vanguard brokerage. I'm not too worried about it, but I must admit their cost structure is just too good to be true! If they were exposed as the biggest security fraud in US history, I could look back and say in retrospect I was obviously getting an impossibly good deal. After all, nobody else manages to offer that kind of deal without temporarily waiving fees! Unfortunately, I'm just too greedy to pay extra for an index fund.
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