Posts filed under “Legal”

When Smart People Do Dumb Things

Joe Nocera had a brutal — and brutally honest — column today. He essentially states that the Madoff victims were willing accomplishes through their own naivete and bad judgment.

“And yet, just about anybody who actually took the time to kick the tires of Mr. Madoff’s operation tended to run in the other direction. James R. Hedges IV, who runs an advisory firm called LJH Global Investments, says that in 1997 he spent two hours asking Mr. Madoff basic questions about his operation. “The explanation of his strategy, the consistency of his returns, the way he withheld information — it was a very clear set of warning signs,” said Mr. Hedges. When you look at the list of Madoff victims, it contains a lot of high-profile names — but almost no serious institutional investors or endowments. They insist on knowing the kind of information Mr. Madoff refused to supply. . .

“These were people with a fair amount of money, and most of them sought no professional advice,” said Bruce C. Greenwald, who teaches value investing at the Graduate School of Business at Columbia University. “It’s like trying to do your own dentistry.” Mr. Hedges said, “It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances.”

And that’s the point. People did abdicate responsibility — and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it.”

While there can be no doubt that the SEC was asleep at the switch, so too were these investors. Not only did they ignore all of the Madoff red flags, many of them put all of their monies with one single manager. That is a huge mistake.

Nocera adds that some investors who had been in a previous billion-dollar Ponzi scheme — where investors managed to recover ~60 cents on the dollar — then turned around and gave their money to Madoff.

Astonishing . . .

>

Source:
Madoff Had Accomplices: His Victims
JOE NOCERA
NYT, March 13, 2009

http://www.nytimes.com/2009/03/14/business/14nocera.html

Category: Legal, Regulation

Charlie Rose: William Donaldson & the SEC (2003)

The conversation about the SEC with William Donaldson begins at 31:37


2003, 26 minutes

Category: Bailouts, Legal, Video

Madoff in Prison

In all the week’s lunacy, we neglected this story — which can be resolved with a simple cartoon: > via Time Magazine

Category: Humor, Legal

How a Loan Becomes a Scam

The Seattle Times has an interesting look at Mortage fraud cases, showing how real-estate insiders were scamming the system for profit: > How a Loan Becomes a Scam Publish at Scribd or explore others: Finance & Investing Business & Legal mortgages real estat Former Bellevue loan officer is expected to appear for sentencing in federal…Read More

Category: Credit, Digital Media, Legal, Markets, Real Estate

McCain & Shelby: “Let Insolvent Banks Fail”

“Close them down, get them out of business. If they’re dead, they ought to be buried.” -Richard C. Shelby, the senior Republican on the Banking Committee, on ABC’s “This Week” > Thus, the strangely inverted world of bank bailouts continues. Republicans who started the entire lurch towards Socialism under George W. Bush at least understand…Read More

Category: Bailouts, Credit, Legal, Politics, Really, really bad calls

iBanks Grabbed $50 Billion in AIG Bailout Cash

Yesterday, in Backdoor Bailouts for Goldman Sachs?, we noted that GS, as well as Morgan Stanley, Merrill Lynch, and Deutsche Bank, were all made whole on their bad bets with AIG. That’s right, what was misleadingly described as systemic risk turned out to be in large part little more than a counter-party bailout — money…Read More

Category: Bailouts, Corporate Management, Finance, Legal, Markets, Politics, Really, really bad calls

Cramdown Implications

An interview with Paul Van Valkenburg of Mortgage Industry Advisory Corp. regarding the Mortgage “Cramdown” Legislation and what does it implies. (Bloomberg News)

Category: Credit, Legal, Real Estate, Video

Should Ratings Agencies Disgorge “AAA” Fees on Junk ?

A new Bloomberg column on the rating agencies: “Standard & Poor’s called for more regulation of credit-rating companies, recommending a global framework that would eliminate potential conflicts of interest, increase transparency and create an industry code of ethics. New rules should ensure ratings are independently derived and unbiased, the methodologies used are disclosed, and regulators…Read More

Category: Credit, Derivatives, Legal

Big Firm Conflict of Interest: The Penalty Box

Its fairly well known in the traditional retail investment world that the client and the advisor often have opposing, and sometimes contradictory, interests. I sometimes forget just how much so in my little world of boutique asset management (We charge about ~1%). A conversation with a couple of brokers from a large firm that I…Read More

Category: Investing, Legal, Markets

Interactive Bank Failure Map

Nice interactive map, via TheStreet.com: > > Source: Interactive Bank Failure Map Philip van Doorn TheStreet.com 02/17/09 – 11:20 AM EST http://www.thestreet.com/story/10464237/1/new-interactive-bank-failure-map.html

Category: Corporate Management, Credit, Legal, Regulation