Eugene Robinson: The Year of Madoff

Eugene Robinson writes in The Washington Post: For anyone taking stock of 2008, Barack Obama is the inevitable choice as Person of the Year. But he’s not the only American whose story suggests that this thrilling, dramatic, unforgettable year will be seen as a demarcation of grand historical eras, a bright line between yesterday and tomorrow. My choice for runner-up is Bernard Madoff. In a sense, we’re all Bernie Madoff. We’ve been running our economy in accordance with his accounting principles for a generation — and now we face a most unpleasant reckoning.

As everyone knows by now, Madoff — once one of the most respected financiers on Wall Street — stands accused of being perhaps the biggest swindler in history. Before his arrest this month, he reportedly told his sons that he had defrauded investors of up to $50 billion. He allegedly followed the playbook written more than eight decades ago by the elegant grifter Charles Ponzi, who used money from new investors to pay juicy returns to old investors. That works fine for a while, but every Ponzi scheme eventually collapses in ruin.

Wall Street veterans recall how investors once begged to be allowed to invest their money with Madoff. Unlike Ponzi, he didn’t promise to deliver flashy double-digit returns overnight. He “earned” his investors 1 percent or 2 percent a month, bull market or bear, rain or shine. Because he didn’t overpromise, and because he limited his clientele, he was able to keep the scheme going for decades.  Continue Reading.

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