It's a Mad Mad Mad Madoff World

A Paul Kedrosky tweet informed me of today's arrest of Bernard Madoff for perpetrating perhaps the largest Ponzi scheme...ever.

What's so not funny is Madoff's central role on Wall Street over nearly five decades. He was Vice Governor of the NASD (among numerous high profile regulatory roles), which is supposed to keep an eye on wrongdoers, though anyone who knows a little bit about the ins and outs of Wall Street knows that this dog never had any teeth.

It's so not funny because everyone knows that trust is central to healthy markets. And when trust goes away so do investors. But my guess is that if not everyone, most people had a little voice in the back of their heads that told them to look the other way whenever little things, like the non-disclosure around hedge funds, CDSs and myriad other "instruments" of high-finance , threatened to turn market believers into skeptics.

And why not let a few items slip past the collective ethical gatekeeper? After all, nearly all of us has a good portion, if not all, of our nest eggs invested somewhere around "The Street", right?

And who wouldn't place their money with Bernard Madoff? Turns out the rich and powerful, those most likely to know more about those sniggling little items slipping past the ethical gatekeeper, trusted their millions to Bernard. Of all people, Mr. Madoff was likely tuned to the gatekeeper's little secret more than most, so he placed his own little devil above his door to whisper sweet nothings into the ears of the unconsciously suspecting millionaires and billionaires he fleeced over the years:


“In an era of faceless organizations owned by other equally faceless organizations, Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner’s name is on the door...Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm’s hallmark.”


But Mr. Madoff is surely the exception to the rule. Don't you think?