Madoff's Confession

I think everyone in New York has waited for the trial/sentencing of Madoff for the last three months with abated breath. I've read a lot of angry posts, a lot of vitriol, and frankly I agree with them. But what I haven't seen is anything about the man. I haven't seen anyone delve into the man's life to see what created this "special" character. I've read about "family friends" who were "shocked." But no one has stated why.

So when the first line of the Guardian article this morning states that "legal experts were flummoxed by the fraudster's willingness" to confess, something finally clicked into place. I've been wondering about this guy for a while, and all the guys like him: the people who lie and cheat as a lifestyle, like a Anne Hathaway's ex-boyfriend who was just sentenced. Or Marc Drier of Drier LLP whose entire firm's wealth was based on selling fake promissory notes. There's something almost serial killeresque about people like this. And, I confess, a keen interest in the subject. And at least in the case of serial fraudsters, it makes me feel sorry for them. The confidence that they express in life, is a complete and utter lie, (like everything) a false front verging on ludicrous bravado and broggadicio. How can someone live like that?

To a certain extent, we all lie to ourselves. I'm good looking, I'm smart, I'm talented. I did this and no one else. I know I did this, but I didn't really do it. I believe I was wronged, and that this person wronged me even though I know it was my fault. We're peculiar and fantastic creatures that way. Our lives are governed by perceptions of ourselves and perceptions of the world that are based on such spurious notions, seemingly sacrosanct, and totally ephemeral, if as Sartre would say, we were confronted with a mirror. But some people go to far. Whether it's fear, or perceived necessity, the little lies are never discovered and progress, and grow. For most people, the little lies don't grow. They're small enough, inconsequential enough, or they're faced immediately. But for men like Madoff and Raffaelo Follieri (Hathaway's ex) the lies only grow ever larger. What fear they must live in, what constant gnawing fear of being found out. And what relief when the lie is finally over.

This I believe is why Madoff was so relieved. He's not a Ken Lay, or a Hank Greenberg, people who acted fraudently, but believe that they were right or justified, he knew that what he did was terribly wrong. And he couldn't help himself. We didn't help him either. Men like Madoff and Follieri didn't become this way overnight. I could almost believe that both could take an insanity plea. But at least in the case of Madoff, he was done with it. Madoff may have stolen the most money in history--that's an accomplishment, and he'll live on in infamy for the rest of his days. Maybe in fifteen or twenty years he'll have some admirers. But Madoff's sin was cardinal. It's one thing to steal from the poor, but Madoff stole from the rich. That would only be forgiveable if he were Robinhood, and giving the money to the poor. No, the man is doomed to ignominy. And he can't wait. All the terrible thoughts he's had about himself, the sleepless nights, the hellish day dreams, they can all rest easy now. Because the truth is known, and he can hate himself without all the needless subterfuge, self or otherwise. Just like we do.

I pity the man. I do. I hope his last few years in prison are relatively easy ones.

The City Sinks Deeper

So, I'm glad to see, again, I wasn't wrong. The city was filthy with Madoff's "money." The NYTimes reported that dozens of major New York developers had given this guy money. That whole building projects might be in jeopardy because there's no more collateral. I am a bit surprised--I thought it was lawyers and auditors who were mostly going to take the hit for this. Seems like the other New York thing, real-estate has come to bear. Everybody knows this guy. And the people who didn't know him personally, wished they knew him. Even the doubters.

I've heard a few things which are disturbing. Some are saying the SEC's days are numbered. Remember, one of the principal reasons for establishing the SEC was to monitor the investment houses (which they stopped doing about thirty years ago, but now really have no excuse since there are no investment houses.)

If the SEC was dismantled--there would have to be a replacement. Securities, particularly after this debacle could not go unregulated. So they'd refit it, give it a new name. But who would they hire? The same administrative staff, the same investigators. Who, afterall, could take their place? The auditors? Clearly not. A new breed of investigator has to be born. Hire me. Not only do I want to investigate fraud, I have a natural distrust of big business, but at the same time, I'm extremely idealistic. I do think there are ethical businesses. Moreover, I think that there are plenty of businesses which have philandered ethically, which can be won back.

A little shamless self promotion. So what? I observed a few months ago that accountants are trained not to care. Or, more accurately, to only rely on the information they receive. They feel that it is not their job to make sure that companies stay on the straight and narrow. Just to add up figures, and ask questions when things don't add up. They only report to the company. And if the company doesn't like it, they can just find new auditors. And the auditors don't have to report anything, and in fact, would be liable if they did. So there is no accountability for fraudalent behavior according to the normal model. The only body that regulates financial statements is the SEC. The PCAOB and FASB make rules, but no one is required to submit anything to them. And who makes their rules? The big four, and a hodgepodge of former SEC staffers.

This sounds bad. I don't think the SEC is crooked. I don't think the auditors are crooked. I don't think the PCAOB or the FASB is crooked. What I think is crooked is the idea that business, and "The Market" is a self-regulating machine. It just ain't true. And if it were--the self regulation occurs only when people are injured. When shit like this happens. Well, to a certain extent, I think that's true: people forget, and markets are cyclical. The system operates well for a time, people get comfy, forget, and then the market crashes. Ostensibly, this happens every generation. Happened in 1830s, 1840s, 1870s, 1930s (earlier for europe) 1970s, 1980s (gulp!) and today (those dates correspond loosely to economic troubles--particulary for the earlier years) So with all that, you might assume that this has to happen. And be particularly glad when it does. As it is, young"ish" investors today stand at the threshold of a really prosperous time. With all the promised regulation, we should be looking at a period of real prosperity, not market inflation. I mean a period of epic growth, like after WWII.

Not to underscore the gravity of the situation, but we are nearing the bottom. Not of the recession, but of the market bottom. Up until now, all the news we've been reading has been backdated. Meaning, we're reaping what our economic masters had sewn two-three years ago. I think there may be a couple more revelations. That the Fed has created new rules for the credit card companies speaks volumes of this. Citibank got a bailout but before the layoffs happened. I don't know what to think about that. Bad news delayed is worse news. But bad news is bad enough. Neither the insurance business nor the credit card business have really faced the music yet. Bailout or no, they will. Both are inflated, both are fairly corrupt. Again--not as in "evil" but in the fact that they've operated sub rosa for too long.

At anyrate, it's like the old Chinese curse, "May you live in interesting times." Let's hope we stay above board. I'll close with a thought I wrote to AM-NY (who declined to publish it--ever since I quarreled with the editor they've ignored me) "As for the mistaken impressions about Darwinism and adaptation, mutations are random, and though success will be determined by survival, who and what survives is largely a combination of the randomly selected attributes that make up each individual (read: mistaken analogy.) In other words, good luck" To wit. The survivors of this latest revolution will have been in the right place at the right time--that's all. The tycoons of the future will have acted.

This City is so Fucked

Marc S. Drier is slime. Amazing slime, slime that sticks to the wall, but still slime. Bernard L. Madoff is slime mold. Here's an example of a really smart guy, who proved the hypothesis I've been selling to nobody for years.

Nobody would buy.

I've been saying it to anybody who will listen, and for years people would tell me I was crazy. Maybe I am, but it seems to me that cheating is the rule of the jungle. Think for a second of all the myriad ways in which you cheat. You cheat on your taxes, you spent an hour buying Christmas gifts on Amazon.com instead of working, you stole office supplies. All really minor shit. But minor people can only steal minor shit. People like me and you, we only have the opportunity to steal pencils, or soda. But the higher up you go...as Becket would say, "The bigger the man, the fuller he is, and the emptier." Think about it, you have a pie chart, if you cheat like 1%. Well, a pie chart of me and just about anyone else would look the same. But if my pie chart represents only a hundred dollars, only 1 dollar of that is a fraud. No one cares about a buck. But when your pie chart represents 100 million...well you get the idea.

I've had very impressive financial people look at me and scoff when I've said this before. EVERYONE IS IN ON IT. And it's not paranoia, it's not a delusional fantasy. It's a question of philosophy. Well, now it's pretty much Q.E.D. not one but every investment bank is gone now, bought, closed, or firesaled. Everyone of them was in on it. Here's the thing...and this is why those impressive people were wrong. When I told them that EVERYONE was in on it. They mistakenly conflated evil with fraud. They thought that the balance of people were good (loosely defined as not fraudalent). And I agree with them. But the question is one of perception. Everyone was selling these shitty securities. Everyone knew about it. The problem wasn't that these people were evil, that would be a ridiculous notion. There is no evil. What they were was in too deep. It was a mob mentality. The fire at the end of the hall was the knowledge that this thing was just too monstrous to stop. So why not go for all the gusto they can grab? And when things were up, who would care? They could buy that new cellphone without a second thought. I see law students and busboys with 3G phones. Seriously, and in New York, that's totally unremarked on.

That's what's so fucked up here. We're all complicit. I walk down my street, and I can point out the investment bankers. I can point out the UES moms who quit their career to raise their kids, with rocks that could take out an eye at forty yards. They took the money, and when the money keeps rolling in, you don't ask how. Go over to the gallery openings every Thursday in Chelsea. With paintings that run from $500 to $50,000 or more, who's doing the buying? We're all complicit. Go out to Brooklyn, maybe pop over to Metropolitan Ave and have a few drinks. Those trendy, scarf clad kids? They're in on it too. They might bitch and whine about the have's and the have not's, but where have they been for the last 16 years? To be sure, there are always exceptions. And none of these people (including myself) are bad or awful people. We really all just fell into complacency. Our literary critics have been warning us--so have the historians, but intellectuals are effete snobs, and they don't really contribute anything anyway.

It's times like these where I stare out at my city, and think, this place just ought to be bulldozed. You know what's worse? Having written that sentence, a shiver of fear ran through me. Of course, I want nothing at all to happen to my city. I love it, and everyone in it. Even the crooks and the frat boys, the sorostitutes, and the lawyers, i-bankers and everyone between. But in this country today. I know full well that there are people watching us. And I'm too small of a fish for people to care about now. But god help me if something happened. Can I write that? Another thing I spent the last eight years telling my conservative friends, who repeated like robots, "I've done nothing wrong, I've got nothing to hide." So what? When you can't speak for fear of reprisal, you are no longer living in a democracy.

Please Obama et. al. fix this. We need regulation, and we need to know what's going on. We need a free press that is solvent and able to withstand the rigors of litigation.

And this is just too rich, Milberg LLP, formerly known as Milberg Weiss Bershad and Schulman before three of the four went to prison, is representing the misled investors!