It doesn’t seem to happen, except briefly.
Perhaps the only way most people learn is through personal experience. Therefore the lessons of the past have to be relearned by each generation.
A depressing thought, but it explains a lot.
A new fear for Madoff’s victims: clawback
They say payback’s a bitch.
But clawback seems even worse. It means that Madoff’s victims run the risk of being victimized twice—once by Madoff, and then again by each other via lawsuits.
That’s hardly their intent. It’s just that the money they invested with Madoff is nowhere to be seen, and many people have lost their life savings or a large portion of their assets.
With Madoff off-limits for the moment, how to recover? The legal theory is that, since the “investors” had been earning high interest from Madoff for years (and paying income taxes on it), even though they had no intent to defraud and no knowledge of the scam and may never see their principal again, they have been benefiting from the fruit of the forbidden tree. At least till now.
And so the idea is to force them to pay back what they were given by Madoff over the years, pool those resources, and divide them equitably among the victims. The only problem is that many have already spent the money, or never got it in the first place but instead reinvested it with Madoff. And it is offset, of course, by what they’ve lost.
Not only that, but it seems it might even be okay to go after victims’ other assets in order to collect. This process appears especially unconscionable in the case of the smaller, individual investor. Chasing some of the larger and still-solvent charities and other institutions, the ones with the deep pockets, still seems wrong, but not as offensive as chasing the smaller private investors.
The former—going after the institutions—apparently is already happening:
Joe Grundfest, a Stanford University securities law professor, predicted complex and controversial legal actions among the Madoff victims, including charitable foundations with considerable assets that could be tapped and thousands who counted on the fund’s proceeds to support them in old age.
“You can imagine that litigation of that sort gives rise to many potential problems and appearances of harshness,” said Grundfest, raising the prospect of charities that used investment proceeds for humanitarian causes being hit with demands for the return of money already spent. “It’s going to be hotly litigated.”
In New York, Atty. Gen. Andrew Cuomo has already signaled that such investors are under scrutiny. He has served subpoenas on at least a dozen universities and nonprofits that took investment advice from Madoff intermediary J. Ezra Merkin.
But individuals are hardly exempt:
…what everyone is bracing for, if you take the Bayou case as an example and blueprint, is the trustee filing claims against anyone who redeemed or received profits in the last six years.”
A primary residence is fully protected from bankruptcy seizure in a few states, such as Florida and Texas, but in California the homestead exemption is only $75,000 per couple under 65 and $200,000 for those at or above retirement age.
The court-appointed trustee in the Madoff case, Irving Picard, is mulling it all over. Meanwhile, the innocent victims wait and wonder—and get ready to claw at each other, whether they want to or not.
Obama’s straw men
I don’t usually channel Karl Rove, but I was thinking this very thing myself.
Madoff and Hanssen: you can fool some of the people
Where’s the missing Madoff money?
Nobody knows—except Madoff himself, and whomever his accomplices (if he had any) might be.
But a couple of things are clear now: Madoff kept detailed records of the money as it came in from his clients. But, astoundingly, he never invested a single penny of it, even as far back as 1993.
This blows the theory that Madoff was an honest guy gone bad in the last couple of years as the market began to tank. It makes it more likely that he is some sort of economic sociopath.
What was his motivation, other than to make a lot of money? Didn’t he have enough to begin with?
My guess—and it’s a guess only—is that he liked the game aspects of it. He got off on fooling people and looking down on them for trusting him. If this is the case, Madoff has a lot in common with spies such as Robert Hanssen, whose motives seemed more psychological than ideological or even monetary.
Feeling superior to others was particularly important to Hanssen, who, like Madoff, led a double life. To neighbors and acquaintances, he appeared sober and religious, an upright family man. His secret life was abominable, a series of betrayals that caused the executions of several Soviet citizens spying for our side, and included his arranging for a friend to regularly view his sexual relations with his wife, unbeknownst to her.
Hanssen, like Madoff, wasn’t caught for a very long time, despite the fact that the FBI was tipped off over and over that he might be a mole. The list of missed opportunities and neglected evidence in the Hanssen case would be funny if it weren’t a tragic outrage.
The same is true of Madoff. These guys were very, very good at what they did—which is the old con game of earning trust while simultaneously betraying it utterly and completely.
Worth reading
Shrinkwrapped with a warning on the spread of ODS.
Reflections the day after: the market’s not buyin’ it
As I write this, the Dow is down about 176. Personally, I’m surprised it’s not down even more, even though it was near the gutter to begin with.
Let’s see—Obama managed to demonize CEOs, set up all households earning above $250K for higher taxes, as well as businesses of unspecified earnings—in order to fill a wish list of Democratic causes, and all in a recession. Mixed with some prettier words of intended uplift and confidence that seemed very empty and cold (and contrived) to me, although better than his previous unrelenting fear-mongering.
Liveblogging Obama’s speech
If I can do the Oscars, why not this?
First up—Michelle, great dress. Kudos.
I have to say it—Rahm Emmanuel’s a good-looking guy.
Obama comes to the podium, the place where he’s most comfortable. Who’s that behind him—Joe Biden? Is he still around? In his eagerness to speak, Obama upstages Nancy Pelosi, who gives him a little tap to let him know she has to introduce him. Shades of the inaugural and Roberts.
We start with the bad stuff again—and apparently he’s been reading neo-neocon, because he says “we will…” and then a string of good stuff.
If we import so much oil, and it’s such a problem, Obama, why don’t you go for the obvious solution?
The bad loans—but no mention of the Democrat (and Acorn) responsibility for pushing them. No surprise there, I suppose.
This laundry list business is difficult for the non-auditory-processor to listen to.
No, of course not, you don’t believe in big government. It was thrust upon you.
How will the American people as a whole respond to this—those who are watching, that is? Well, since most still seem to approve of Obama and trust him, my guess is that this speech will remind them of what they like about him.
Joe Biden, tough head of the tough oversight committee, to make sure the Democrats don’t overdo? Oh, my goodness.
Finally we’re getting to what I’m interested in—the credit crisis. I’d also love to hear what he intends to do about separating out the bad paper from the good. But I hear nothing but nonspecific generalities.
He reads the riot act to those mean old CEOs, the villains of the piece. Obama will keep them in line.
And he nearly apologizes for helping banks—“it’s not about helping banks, it’s about helping people.”
“Slowly but surely, confidence will return, and our economy will recover.” If you say so. It ain’t Churchill, nor is it FDR, but at least it’s better than the crisis-laden gloom. The truth will be in the details, and the results—good or bad.
He rejects those saying government has no role in the recovery. But who’s saying that, except for the most extreme libertarians? Nobody.
“Time for America to lead again”—I’ll drink to that.
Yep, we need clean, renewable energy. So Obama, how about nuclear power? I don’t hear it on your list. The items I do hear are not going to be enough, you know. But isn’t it pretty to think so?
I don’t recall this laundry-list style of speechmaking prior to Bill Clinton, who was the champion of the genre. But here it is again. Has Obama changed speechwriters?
The recovery plan had no earmarks? Wow. Even if that’s technically correct (and I don’t know whether it is or not), the bill certainly didn’t lack for pork or special interest grants that have nothing to do with the goal of stimulating the economy.
A pox on all those 250K households!
“I will not allow terrorists to plot against America…” Boy, is this guy ever full of himself.
Just how does this speech differ from a State of the Union message? I thought it was supposed to be about the economy. It’s all over the place, and loaded with cliches. I wonder why that surprises me.
Math gone wild
Here’s the cautionary tale of one of those “math guys” or “quants,” and his brilliant formula—gone wrong.
It’s a sobering reminder of how spiffy new computer models and mathematical formulas related to real-world events can end up as just the old “garbage in, garbage out,” because we don’t know all the variables to include. In the case of something called “Li’s cupola function,” a beautiful mind came up with a beautiful mathematical formula that was applied by investors to mortgage risk, and it ended up spelling economic doom for most of us. Oops!:
It was a brilliant simplification of an intractable problem. And Li didn’t just radically dumb down the difficulty of working out correlations; he decided not to even bother trying to map and calculate all the nearly infinite relationships between the various loans that made up a pool. What happens when the number of pool members increases or when you mix negative correlations with positive ones? Never mind all that, he said. The only thing that matters is the final correlation number””one clean, simple, all-sufficient figure that sums up everything.
A few people warned that the map was not the territory, but their cautions were ignored, and why? Too many people were making too much money, that’s why. At least for a while:
Banks dismissed [warnings], partly because the managers empowered to apply the brakes didn’t understand the arguments between various arms of the quant universe. Besides, they were making too much money to stop.
Here’s the mind-boggling part, to my way of thinking. The following should have been a red flag the size of Texas:
[B]ecause the copula function used CDS prices to calculate correlation, it was forced to confine itself to looking at the period of time when those credit default swaps had been in existence: less than a decade, a period when house prices soared. Naturally, default correlations were very low in those years. But when the mortgage boom ended abruptly and home values started falling across the country, correlations soared.
Don’t blame Li—he just made the model, he didn’t apply it. Those who did were unaware of its limitations, partly because they didn’t get the math, partly because they decided to ignore history, and partly because there was gold in them thar hills.
That elusive goal: bipartisanship
Bipartisanship—what’s not to like?
It’s a goal Obama talked about quite a bit while on the campaign trail, as did McCain. Obama is not unique in having paid lip service to bipartisanship when it was of benefit to him during the election and then dumping it when he didn’t need it to pass some of the most polarizing—and partisan—legislation in history. That’s politics, folks.
But surprise surprise, I’m going to defend Obama for his failure to be bipartisan. The generalized yearning for bipartisanship has always reminded me of the old Rodney King plea, “Why can’t we all just get along?” The answer is—“because we can’t, that’s why.” And that failure is—to coin a phrase—a bipartisan one.
If we could agree, we would. The fact that we don’t is a reflection of the reality that goals differ, and that even when they are the same there is disagreement on what course to take to best reach them.
People sometimes say there’s no difference between the two parties because all politicians are crooks, hypocrites, liars, and self-serving cheats—and the people who say that have a point. But politicians from different parties are a different flavor of crooks, hypocrites, liars, and self-serving cheats, as well as including a smattering of upstanding public servants. Depending on which party is in power at any moment, we are going to see different laws and different policies, with different results.
One would hope that, in the current financial crisis, we would all be able to pull together in a bipartisan way to make things better for everyone. That would be great, if it weren’t for two things: (a) most politicians see crisis as an opportunity to solidify their power and the power of their respective parties; and (2) in the present case, most politicians disagree on the seriousness of the crisis, its causes, and what approach will improve matters. Those are very real differences that are not easily resolved by chanting “bipartisanship” as a mantra.
Most of the bipartisanship in American history has occurred either on trivial issues, or in the passing of bills that nobody ended up liking (McCain-Feingold, anyone?), or in times of defense after a clear and unprovoked attack (Pearl Harbor, immediate post-9/11).
Otherwise, as they say in Brooklyn—faggetaboutit.
[NOTE: Bipartisanship is different from the law of thirds. The latter is simply the principle that if either party goes too far off center in its grab for power and influence, it may alienate the moderate American middle and lose the next election. That is, of course, unless they change the rules in order to further entrench their power, or control the airwaves and print media to such an extent that they control the message. Hmmm.]
It gives new meaning to the phrase “toe cheese”
For anyone who still thinks Obama is a centrist…
…you might want to take a look at this.
And boy, is David Brooks conflicted. His heart’s with Obama but his head says “beware.”
The Iraqi Museum meme that will not die
I don’t know why I bother with the AP anymore. Maybe it’s because their articles permeate most of the newspapers in the country, and become the reality for so many readers.
And so today we have the re-opening of the National Museum of Iraq. Here’s how the AP’s Sameer N. Yacoub presents it:
Iraq’s restored National Museum reopened Monday with a red-carpet gala in the heart of Baghdad nearly six years after looters carried away priceless antiquities as American troops largely stood by in the chaos of the city’s fall to U.S. forces.
The ransacking of the museum became a symbol for critics of Washington’s post-invasion strategy and its inability to maintain order as Saddam Hussein’s police and military unraveled…
Once the home of one of the world’s leading collections of artifacts, the museum fell victim to bands of armed thieves who rampaged through the capital after the Americans captured Baghdad in April 2003.
It was among many institutions looted across Iraq, including universities, hospitals and cultural offices. But the richness of the museum’s collection ”” and its importance as the caretaker of Iraq’s historical identity ”” led to an outcry around the world.
U.S. troops, the sole power in the city at the time, were intensely criticized for not protecting the treasures at the museum and other cultural institutions like the national library and the Saddam Art Center, a museum of modern Iraqi art.
It goes on. And on. And every word of it is true—and misleading.
It’s not till paragraph fifteen that we find a tiny mention of exculpating evidence:
It could have been worse. Iraqi officials closed the museum several weeks before the U.S.-led invasion and hid some particularly important artifacts at secret locations to prevent their theft.
But still, a person could read the entire article without ever learning that (a) a very tiny percentage of the artifacts were stolen; and (b) many of the thefts were inside jobs that probably occurred before the Americans even got there.
The extent of the looting of Iraq’s National Museum has been disputed. News organizations for weeks reported that as much as 100 percent of the museum’s 170,000 catalogued lots (501,000 pieces) had been looted, when no more than 3 percent of the artifacts in fact were removed, and perhaps only 1 percent of them stolen by outside looters…About 15,000 of the museum’s 501,000 artifacts were stolen, and about two-thirds of the missing pieces probably were taken in an inside job before American troops arrived. About 5,000 pieces, most of them tiny beads and amulets, were taken by looters. According to The Washington Post (Sept. 15, 2003), investigator Col. Matthew Bogdanos estimated that most of the looted items could have fit into one large backpack…[T]the number of major pieces removed from the museum’s public gallery was in the dozens.
Yacoub and the AP either don’t know these facts, or they are well aware of them and have carefully crafted the article to mislead (read: lie) by omission. A reader who remembers the original reports of utter museum devastation could read the new article and continue to believe that this was the case. Nice going, AP!