Bernie Madoff and his Finacial Crime

The Ordinary Evil of Bernie Madoff

Date 30/06/2009

The Right Side

Bill Bonner

London, England

Tuesday, 29 June 2009

Let the punishment fit the crime!

Poor Bernie. The man has been ordered to spend 150 years in the hoosegow. What for? Who did he kill? A century-and-a-half seems a little excessive for a financial crime. You could hold up three liquor stores and rape a whole convent and still not get 150 years. With a little good lawyering, a history of child abuse in the family and good behavior in the big house, you’d be back on the street in 18 months.

But all the papers seem delighted. “Locked up for Life!” says one of today’s headlines. The judge “threw the book at him,” says another. His victims wanted him to get no mercy. The judge gave him none, imposing the maximum sentence. He is “extraordinarily evil,” said the man on the bench.

Justice has been done. Right?

Here in the building with the gold balls, we’re not so sure. We stand up for lost causes, die hards and scalawags. Besides, we’re not convinced that Bernie is extraordinarily evil at all. He seems much more like an ordinary evil to us.

They say he defrauded investors out of $65 billion. The amount is unusual, but the crime is as common as income tax evasion. Who gets 150 years for evading income taxes? Heck, in civilized countries it’s not a crime at all – but a civil misdemeanor, subject to fine and retribution, not punishment.

But didn’t he lie to investors? Well, yes... he exaggerated the returns investors were likely to get from his fund. But if you put every fellow on Wall Street who does that in jail, you wouldn’t have any room for stick-up men and wife beaters.

Isn’t he the biggest financial scammer of all time? Well... he’s the title holder now. But he has a lot of competition close on his heels. Bernie’s crime was taking money from people under false pretenses... and then being unable to give it back to them. How is that different from the financing activities of the US government?

This year alone, the feds will borrow 50 times as much money has Bernie managed to take in during his whole 20-year career. They can only pay it back by borrowing even more money from more lenders. This is not very different from the typical “Ponzi” scheme, except that it’s the government doing it. Eventually, the suckers are going to lose a lot of money.

And when you balance Bernie’s sins against his virtues, we’re not sure the man doesn’t come out at least as well as many of his accusers. While Bernie was pretending to make his investors rich, the SEC was pretending to protect them from Bernie. In fact, neither were really doing what they claimed. Which is to say, both are guilty of ordinary evil.

As we pointed out yesterday, nothing is as dangerous as good luck. Madoff was not extraordinarily evil; he was just extraordinarily lucky. He was plying his trade when the feds were pumping up the biggest financial bubble in history. No wonder so much hot gas came his way. His luck ran out when the bubble popped. And now a court has found him guilty of fraud and a judge has ordered him locked up for a period equal to roughly the time between the end of the US War Between the States and the resignation of Richard Nixon.

While Bernie is behind bars, the SEC and FED officials are still at large. Both are clearly guilty of dereliction and negligence.

But, what is the point of keeping Madoff in prison? He represents no threat. Rather than pay $30,000 per year to keep him locked up, we suggest that he be forced to do community service work. He should be pressed into service as the next head of the Federal Reserve after Ben Bernanke’s term expires in December. With Madoff in the big office, there would be no longer any illusions about what sort of bank the Fed is running.

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