Lost vs. Never Found

After being helplessly subjected to a yearlong financial meltdown that few Americans understand---who amongst us can explain how mortgage securitizations and credit-default swaps are supposed to work, much less why they malfunctioned?--it’s refreshing to see that an old fashioned swindlers’ device is alive and well.

Bernard Madoff executed the biggest illegal Ponzi scheme (Social Security is legal, hence the qualifier) in history. The aftershocks threaten to bring down some financial institutions that made it through the subprime earthquake. Many wealthy individuals are no longer so wealthy, and a few have been wiped out.

Mr. Madoff built up his reputation over decades. He wouldn’t accept just anyone as a customer:

In cultivating an aloof mystique, Mr. Madoff had fooled those who fancied themselves the wiser. Typically, investors needed at least $1 million to approach Mr. Madoff. Being a member of this club also helped. But even with those prerequisites, there was little guarantee that Mr. Madoff would take the client.

We’re living in a strange period when one can be grateful for not being richer or more successful. If you’re at the top of the heap in a large organization, you can be arrested, deposed, subpoenaed, and/or sued for events for which the law or media says you’re responsible, although you may really not know much about what transpired.

Or if you’ve accumulated a sizeable nest egg that you’ve entrusted to advisors with unimpeachable reputations, your wealth can still vanish overnight because of incompetence or thievery or bad luck. As for the rest of us, our struggles may be frustrating, but they are nothing compared to the miseries of the poor fallen fellow who has to start all over. Paradise Lost is worse than Paradise Never Found. © 2008 Stephen Yuen