Help Yourself. Nobody Else Cares.
If there's one lesson I've learned from having my car stolen, being the victim of a hit-and-run, and identity theft, it's that you shouldn't expect the police to get you justice, and certainly not in any sort of short order -- even if you present them with a pile of evidence, gift-wrapped, with a big bow on top.
I'm not saying police officers are necessarily negligent (any more than people in other professions), but there's a whole lot of crime out there, and your particular little crime, while important to you, is just a tiny drop in an ocean of murders, muggings, and countless other small crimes.
The other lesson I've learned is that institutions created to protect you will probably not protect you...for example, the Comptroller of the Currency (the administrator of national banks).
I reported my findings from my investigation of Bank of America to the Comptroller in September 2008. It's now March, 2009. After complaining numerous times to the department where you're supposed to complain (one of the guys I talked to actually retired since I'd last talked to him, in the fall), a few weeks ago, I called the Comptroller himself, John C. Dugan. His secretary bounced me in short order to Kevin Mukri, the press guy.
I told Mukri that, unlike probably most people who call them, I wasn't looking for some personal redress. I'd gotten my money back. I was worried about all the other people who I believe are being endangered by B of A's "security" measures. Mukri blew me off -- told me to write a letter to Dugan himself...as opposed to getting off his big, Comptroller-employed ass and walking down the hall and saying something.
What's going on here? I have my suspicions, and they aren't sunny, happy, consumer-friendly, justice-be-done-oriented things.
But, at least I've had an education; in short: You want a watch dog? Strap on a flea collar, get down on your hands and knees and start barking at trespassers.
Expecting otherwise could leave you in all kinds of jeopardy -- including jeopardy from robbers who don't do the deed with knives or guns, just a big, cheshire smile. Accordingly, Joe Nocera writes in The New York Times that Madoff had accomplices -- his victims:
...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.I suppose you could argue that most of Mr. Madoff's direct investors lacked the ability or the financial sophistication of someone like Mr. Hedges. But it shouldn't have mattered. Isn't the first lesson of personal finance that you should never put all your money with one person or one fund? Even if you think your money manager is "God"? Diversification has many virtues; one of them is that you won't lose everything if one of your money managers turns out to be a crook.
"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.
...Even Mr. Wiesel (as in Elie, who lost $15 million from his foundation and his personal fortune) thought the government should help the victims -- or at least the charitable institutions among them. "The government should come and say, 'We bailed out so many others, we can bail you out, and when you will do better, you can give us back the money,' " he said at the Portfolio event.
But why? What happened to the victims of Bernard Madoff is terrible. But every day in this country, people lose money due to financial fraud or negligence. Innocent investors who bought stock in Enron lost millions when that company turned out to be a fraud; nobody made them whole. Half a dozen Ponzi schemes have been discovered since Mr. Madoff was arrested in December. People lose it all because they start a company that turns out to be misguided, or because they do something that is risky, hoping to hit the jackpot. Taxpayers don't bail them out, and they shouldn't start now. Did the S.E.C. foul up? You bet. But that doesn't mean the investors themselves are off the hook. Investors blaming the S.E.C. for their decision to give every last penny to Bernie Madoff is like a child blaming his mother for letting him start a fight while she wasn't looking.
I'm assuming you've called the Better Business Bureau?
NicoleK at March 15, 2009 4:40 AM
I agree that it is not the government's place to make the investors whole. But it is the government's responsibility to return as much money to the investors as possible. And in a way, some of it should come out of the SEC's hide. Unfortunately -- that would mean out of our pockets.
I think that some people at the SEC need to be held criminally liable for negligence. I'm sure that more than one individual/company reported to the SEC that Bernie was cooking the books.
If an agency is not effective at doing its job, it needs to be changed, disbanded, or replaced with something that does work.
Jim P. at March 15, 2009 5:45 AM
Amy Alkon
http://www.advicegoddess.com/archives/2009/03/15/government_will.html#comment-1638501">comment from NicoleKActually, the Better Business Bureau is not what you think it is. I wrote a piece for my book about them -- there's a great U.S. News & World Report piece on them by the way -- but I ended up cutting it out. I'll probably publish it online as supplemental material to my book.
In short, businesses pay membership fees -- and those fees seem to be of great concern to the BBB, and they delete complaints of people like me.
Amy Alkon at March 15, 2009 7:16 AM
Amy Alkon
http://www.advicegoddess.com/archives/2009/03/15/government_will.html#comment-1638502">comment from Amy AlkonActually, I forgot, it's a Money magazine piece by Leslie M. Marable:
http://money.cnn.com/magazines/moneymag/moneymag_archive/1995/10/01/206587/index.htm
The all-caps headline says it all:
LIKE DOROTHY AND THE INEFFECTIVE GREAT OZ, CONSUMERS SEEKING HELP FROM THE NATION'S WIZARD OF CONSUMER ADVOCACY OFTEN GET LITTLE OF VALUE. A SPECIAL MONEY REPORT REVEALS WHY THE... BETTER BUSINESS BUREAUS ARE A BUST
Here's a piece from my book -- was to be part of an appendix, will now be supplemental stuff posted free on my site:
I'd love to see one of these people or other BBB victims like them sue the BBB for damages -- mainly because it would expose the BBB for what it really seems to be (although the article, which is over 10 years old), names some bureaus which seem to be exceptions. Some may be okay.
Amy Alkon at March 15, 2009 7:28 AM
"You want a watch dog? Strap on a flea collar, get down on your hands and knees and start barking at trespassers."
Amen.
Pete the Streak at March 15, 2009 8:10 AM
Best bumper sticker I've ever seen: "A gun in the hand is better than a cop on the phone."
Yes, the SEC is negligent. No, we should not bail out investors.
The SEC requires that people who invest in high-risk investments (hedge funds, etc.) be "qualified investors." In theory, these people have had enough experience, and are worth enough, that they can handle the risk and potential loss. I don't know enough about Madoff's fund to know what type it was... but no one should've had their entire life savings in one place. Period.
And, yeah, a good rating from the BBB doesn't mean sh*t. I worked at a jewelry store some time ago, and we had a customer (who was in the wrong) file a report with the BBB against the store. We weren't members. A salesperson for the BBB came by to pitch the owner on joining... Essentially, if you're a member, you can "resolve" complaints against the business with the BBB, not the customer. That's why most member business have such an excellent rating.
ahw at March 15, 2009 8:39 AM
Amy Alkon
http://www.advicegoddess.com/archives/2009/03/15/government_will.html#comment-1638513">comment from ahwThe SEC requires that people who invest in high-risk investments (hedge funds, etc.) be "qualified investors."
I am not one of them. That's why I don't own any stock, save for eight blue chip shares my grandma gave me about 20 years ago, which have multiplied into 32 shares. They were worth $8K a few years ago. Now they're worth $3K. Lovely.
Businesses with complaints against them are how the BBB apparently makes money. Businesses without complaints are financially nowhere to them. Join and they'll erase the complaint is how it goes in most cases, from my understanding, research, and personal experience. It's a scam that's been perpetrated on the public for far too long.
Amy Alkon at March 15, 2009 9:15 AM
(1) The government usually dismisses "small" thefts as being unimportant. But the total volume of small thefts is large, and so they deserve attention just like the smaller number of large violations. There is a true cost-benefit in suppressing small crime, but underfunding denies us significant protection.
(2) Madoff's refusal to reveal details about his operation was the primary indicator that Madoff ran a scam. Smart institutions run away at the first sign that some information is not available. Note that this is true even in an area where the ordinary person might expect some secrecy.
Some people fooled themselves; they thought Madoff's returns were earned by illegally "front running" his "honest" brokerage activities.
Investing with Bernie Madoff
(3) Consider how this applies to Global Warming. Many studies supporting Global Warming have been invalidated after the data and techniques were revealed. These "scientists" refused for years to release the details, claiming that they feared "false" reviews of their data.
Do not believe people who will not reveal their sources, methods, and data. They are hiding something for a reason. They certainly should fear reviews of their data.
Global Warming Caused by Humans is a Scam
. The Global Warming Hockey Stick Hoax
. easyopinions.blogspot.com/2008/12/global-warming-caused-by-humans-is-scam.html
Andrew_M_Garland at March 15, 2009 10:13 AM
Imagine how great things will be when the government has a monopoly on healthcare.
MarkD at March 15, 2009 10:58 AM
I'm convinced that many of the people investing with Madoff assumed he was front-running or otherwise violating financial laws to achieve his claimed returns. They had an interest in not looking too closely, because they assumed they would not like what they found.
They were either stupid or attempting to commit a crime. They deserved to lose their money. Karma is a bitch.
P at March 15, 2009 11:04 AM
This NYT piece is almost the article I've been waiting for, one that describes Madoff's investors as criminally complicit. The best article ever will say it with these words: Madoff's investors were stealing from each other.
Andrew's link comes very close indeed.
Crid [cridcridatgmail] at March 15, 2009 12:47 PM
Crid, you have it right.
One of the hallmarks of any successful con is that the mark is trying to get something for nothing. They are victims of their own greed, and are complicit in their own victimization.
As for those who lost everything because they trusted it all to Madoff in an environment of secrecy -- all to get what seemed a guaranty of success -- well, they are dumb-asses who deserve no sympathy.
Jay R at March 15, 2009 1:07 PM
Amy Alkon
http://www.advicegoddess.com/archives/2009/03/15/government_will.html#comment-1638541">comment from Andrew_M_Garland(1) The government usually dismisses "small" thefts as being unimportant. But the total volume of small thefts is large, and so they deserve attention just like the smaller number of large violations.
I agree with you, (Andrew M. Garland), and by the way, I've spotted some really insightful comments from you on the WSJ lately.
I've tried really hard to expose B of A, and I'm going to keep at it. My own issues, due to the decline (and disappearance) of newspapers running me is tripping me up a little, but I'm not going to stop. And when it finally comes out, I'm going to be naming names loudly -- journalists who ignored the story, Senate and House committees who ignored my complaint, along with those from B of A who put their customers at risk for identity theft; I believe, from my investigation, because it's cheaper than connecting all their banks by computer. Instead (again, from my investigation), it seems, in many cases, teller's simply HOPE it's you they're dispensing your cash money to.
Unfortunately, Byron Acohido, one of the many reporters I pitched the story to, said today's USA Today can't fund an investigative piece of the scope that's needed here.
What the excuse is of the Senate Banking Committee, the House Finance Committee, Jerry Brown's office, and all the rest, I have no idea.
Amy Alkon at March 15, 2009 1:25 PM
> they trusted it all to Madoff
> in an environment of secrecy
Kind of understates things... One admirable part of the NY Times piece is that it shows how Madoff's investors were essentially –no, proudly– incurious. Madoff didn't have to keep secrets from them. (Or it turns out, from much of anybody else. That's the theme of Amy's post, that there's no law in America against making a bad investment.)
Let me scratch at this a little more, though I'm not likely to say it or even think it any more clearly.
These investors had a really childish approach to investment. They were like children who figure out one day that this dinner isn't magically appearing on their plates... Mom and Dad have to go out and earn the money for the food and the video games and the tennis shoes. And it's scary to know that as children, they couldn't go to the factories and offices and earn the food like their parents do! But it's cool— because their parents love them and will go out and deal with the harsh world on their behalf to bring home the bacon. The children can relax.
The world of finance is challenging and complicated. People who really understand how these complex systems work can make us feel like children when they describe them to us. But as adult we know what what we don't know. We tacitly acknowledge that we could fucking well go to the library or back to college or otherwise study what's going on in these brokerages and so forth, and do it all for ourselves. We adults understand that because our talents and study have gone elsewhere, we'll pay a higher price for having specialists handle investments... Just as we'll pay a higher price to a plumber for fixing the pipes. I don't know how to weld two pieces of copper in the crawlspace of my house, especially if sewage is flowing onto my shirt while it happens.
What makes Madoff's investors so repugnant is that they never grew up. And Bernie convinced them that they never had to. They wanted to believe in a world where childish trust would protect them from the work and risk of dealing with smarter people than themselves... People not just smarter, but just as self-interested. Maybe more so.
And now they want to be federally compensated for their naiveté.
Well, dammit, no!
It especially hurts to say this to someone like Elie Wiesel... But on the other hand, there's perhaps no one else in the world of whom we should expect more insight about the nature of trust.
Please, I beg you... As you continue to read stories about Madoff and his clients, remember that they were making remarkably high returns on their investments. They weren't making just as much as everybody else while they happened to be sucked into the galactic vortex of Madoff's incredible cosmic mind-control.... They were with him because they thought they were doing better than you were. And while that was going on, they weren't asking you for indemnification, nor were they offering to cover your loses.
Crid [cridcridatgmail] at March 15, 2009 2:08 PM
And has anybody noticed that Madoff isn't ever described as having any special personal qualities? This guy was not Koresh or Jim Jones or Charlie Manson. Even in the Vanity Fair piece (see Andrew's link above) which describes so many people who knew Madoff, we get no clear description of personal magnetism or competence or any other allure. (And of course we haven't yet seen a description of his time at NASDAQ and how it did or didn't affect his subsequent criminality.)
This makes me think even more that this is mostly about needy, clumsy investors... Perhaps even more than it's about incompetent regulation.
Crid [cridcridatgmail] at March 15, 2009 2:27 PM
And now they want to be federally compensated for their naiveté.
Well, dammit, no!
Crid,
Would you agree that the investors do, at least, deserve to get back the proportion whatever they can get out of Madoff and eventually other convicted cronies?
Jim P. at March 15, 2009 3:12 PM
Sure, Jim... Pennies on the dollar. This morning there was a story that his personal wealth was about $825 million, with losses estimated at $65 billion-with-a-B.
By all means, have at him. He's a nasty man and you're welcome to whatever flesh you can pull from the corpse. But when investors look to me for sympathy, they'll get a sad, pouty face and little else... Since that's all they gave to the rest of the market when they seemed to be doing so well.
Crid [cridcridatgmail] at March 15, 2009 6:43 PM
One more thing... The description of the earnings of Madoff's criminal funds are uniform: Always one or two percent per month, with no discernable response to other global market events.
Again, I think the seeming isolation from the complexities of the larger world appealed to Madoff's suckers.
It was a childish fantasy of paradise.
Crid [cridcridatgmail] at March 15, 2009 6:58 PM
The $65 billion is not principal. It includes fictitious gains. So the losses of principal are far less than advertised. Of course you need to include honest gains they could have received elsewhere, but who knows what those might have been.
kishke at March 15, 2009 8:14 PM
Good point and well made, but do you suppose the investors would ask only for the principal back?
And if they did, would you feel any greater inclination to cover them? I knew a guy who opened a pizza parlor on a roadside on Highway 37 south of Indianapolis in 1977. It tanked. Honest effort though: Good pies, fresh ingredients, fast service, tidy decor, reasonable prices. Should we cover his losses? Since when are uninvolved parties expected to cover principal loses?
(Actually I'm not sure what you mean by needing "to include honest gains they could have received elsewhere." Who where huh?)
Crid [cridcridatgmail] at March 15, 2009 8:41 PM
Also, ... uh, I should thought more before answering Kishke. This gets back to a conversation here last week about "paper loses".
To Kevin Bacon and Nancy Silverton and Jeffery Katzenberg and Elie Wiesel, that wealth wasn't "fictitious." They had plans for it. They feel they've been robbed. Are they wrong?
(PS- Jeffery KATZENBERG, for fuck's sake... This guy's said to be one of the most aggressive personalities in Hollywood during the past thirty years. No one in the world should have a better understanding of the deception behind Disneyland fantasies.)
Crid [cridcridatgmail] at March 15, 2009 8:48 PM
Amy Alkon
http://www.advicegoddess.com/archives/2009/03/15/government_will.html#comment-1638609">comment from Crid [cridcridatgmail]Madoff didn't have to keep secrets from them.
It seems, all he had to do was make it an exclusive club few people could get into. So many were all so focused on getting in, they didn't look at what they were getting into.
The same girl who has sex with a guy on the first date holds out and she's much more attractive to him. This was a guy who crossed his legs, on a stunning scale.
Amy Alkon at March 16, 2009 3:49 AM
Crid, I'm not arguing. I don't think we should be liable for their bad investments. I've made my share - one with a scam artist like Madoff - and no one has made them good. Was just pointing out that the 65 bil claim is way inflated in terms of principal lost.
Regarding the fictitious gains, they never existed. The principal was stolen and that was that. Bacon and Weisel and the rest thought they still had money in the bank, but they were mistaken. The horse was long out of the barn; they just didn't know it. They had plans? So do I, for the money I'll have when I win the lottery if I would only remember to buy a ticket.
kishke at March 16, 2009 7:36 AM
Dude/Miss kishke, please understand: Cynicism and sarcasm are two of my favorite things. I like them more than I like raindrops on roses and whiskers on kittens, or bright copper kettles and warm woolen mittens.
But you can't let a love of righteous snark confuse your understanding of this point: A really, really important component of wealth is faith, or a least a belief that the future is constrained in the ways it can play out... ('It's not possible that Warren Buffett will stiff a cabbie'.)
I understand what you mean by "that was that", but it doesn't fully account for the difference in American life today and American life one thousand days ago.
See this one from McArdle.
Crid [cridcridatgmail] at March 16, 2009 7:49 PM
> This was a guy who crossed
> his legs, on a stunning scale.
His dates were pathetically, inexcusably horny!
Crid [cridcridatgmail] at March 16, 2009 7:50 PM
Dude not Miss.
I see the point re. the sudden psychic loss (and like the insight re. embezzlement). I just don't think that this entitles them to its repayment.
kishke at March 16, 2009 8:17 PM
Agreed! Agreed!
Crid [cridcridatgmail] at March 16, 2009 8:24 PM
I've been hearing radio ads for a "Rich Dad/Poor Dad," seminar here in Chicago recently. One of the hook lines is something to the effect of "why you might not want to diversify your investments." Yup. Another Bernie Madoff in the making.
Omnibus Driver at March 20, 2009 7:38 PM
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