The Times’ Joe Nocera takes an unsympathetic view of Madoff’s victims. Hard not to agree with him that, sorry stories or not, we taxpayers shouldn’t make them whole.
“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. Mr. Hedges said: “It’s like trying to do your own dentistry. 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 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.
For What It's Worth 
Common sense
Not difficult to figure out basic financial concepts of risk and reward…diversification….and due diligence
Should be about as basic as preventive healthcare, diet, hygiene, STD/pregnancy avoidance…but many (of same crowd) fail that stuff, too
Most people choose to spend their free time closely following stuff like sports or pop culture rather than basic personal finance….should live w/consequences of poor judgment and priorities
As a taxpayer, not a proponent of wasting scarce dollars protecting greedy morons from their own poor judgment….neither greedy morons nor scamsters will ever be eliminated, no matter the budget for regulators nor jail time (and costs) spent
FINALLY!!
You agree with me. People do need to take personal responsibility. These whiney little investors want to blame others. Its their fault and they should all go pound sand.
Off to reggae night!!
Your pal,
Walt
Of course I don’t think that Madoff’s victims should be bailed out, however, I do not think they should be insulted because they failed to seek “professional advice.”
They were dealing directly with someone who was the former chairman of the NASDAQ. How much more professional or “inside Wall St.” could one be?
Oh, feel so sorry for me. I was a victim too. Why do people dislike me so much?
Mr. Noel
Don’t necessarily need “professional advice”
Much self-education is possible; would read various, basic books by guys like Greenblatt, Swensen, etc and choose own conservative portfolio approach
Most truly smart “professional” investors are, by definition, billionaires usually closed to new investors or retired or only accept large, new investors referred by prior, desirable investors….and it takes a true moron to give a disproportionate fraction of one’s net worth to anyone, even one viewed as a “smart” investor
Rest of so-called “professionals” usually fail to keep pace w/S&P 500 index fund over any 10+ yr period….and their net worth and income typically reflect their investing skills (or lack thereof)
Flyover Girl:
You mistake “inside Wall Street” for honesty and financial acumen.
See: Milken, Michael; Kerviel, Jerome; Leeson, Nick
For corporate America, you might want to look into Bernie Ebbers, Jeff Skilling, and Ken Lay.
Just because someone is a doctor, and graduated Harvard Medical School, doesn’t mean s/he is any good. Just because someone is a lawyer with Sullivan & Cromwell doesn’t confer automatic legal excellence.
None of my retirement or savings is with a one-man show. No matter how good they seem – Jim Simons, Paul Tudor Jones, even John Paulson – there is always something vaguely disreputable about people who don’t have or want a succession plan, and love the press, the money, and the adulation. YMMV.
CEA,
I agree with you in whole, and have made choices that might be similar to yours with my own money.
My point was merely that those who lost funds thought they were dealing with a professional, and by nearly any measure, Bernie Madoff was considered a professional with a very good word-of-mouth reputation. It’s just unkind to further insult victims who thought they were doing the right thing.
Questioning their due diligence makes me a little queasy. I’m wondering to what degree that even the most involved investors check out their funds. I have some money in Vanguard index funds – yet I have no idea who their accounting firm is. Just never thought to check. It’s easy enough to find that out, but the quality of a manager and even sometimes the strategy is harder to discern.
Oh please, no one is saying you have to check the accountant.
But when your manager is up double-digits and the Dow and S&P are down double-digits – and he employs the same strategy in down markets that he did in up ones – you should be asking questions about how that is in any way possible.
I believe that people just didn’t bother asking too many questions. 10% isn’t too much to ask, is it? But yes, it is, because stocks don’t go up 10%/year. THey go up 25%, -15%, etc. etc. No one in the history of mankind has ever done +10%/year, every year, with no down years. Ever. And THAT is what should have been questioned, or at least looked at twice.
If a surgeon told you he never lost a patient, whether they had heart troubles, cancer, or just wanted a nose job – you’d be suspicious, right?
What if a lawyer told you he never lost a case, ever, no matter how much the evidence was stacked against him? All due respect to Mr. F – I bet even he might have come up short on a case or two.
Bernie – never had a down year. I would say over a 30 year period, had he had 5 or fewer “down” years, it would be suspicious. 1? ridiculous. 0? impossible.
You don’t have to be an expert, or ask esoteric questions. But you also can’t be blinded by personal greed.
CEA, there’s an old saw about lawyering where some lawyer on the verge of retirement, looking back says, “when I was young, I lost some cases I should have one, and when I was older, I won some cases I should have lost so, on balance, I figure justice was done.” But no one I know ever won every case he should have, let alone every case he ever took. I’d have the same doubts you have if, say, a sports handicapper claimed 100% accuracy. In defense of some of the Madoff investors, I’ll bet some of them didn’t realize that a claim of never having a down year is the same thing. But ignorance is not bliss, it’s just ignorance.
Yes. And I’d like to add – the words “all my life’s savings” should never, ever be in the same sentence as “managed by one firm/person/fund”.
My favorite was the guy in the Joe Nocera column in today’s NYT, who said he wanted a 60%-payback from the government. Really? I”d like 60% of my losses from 2008 paid back too!
CEA,
Your not destitute and stupid so you get nothing but the privelege to keep paying
Stop trying to live like the Jones’s, which means living above your means. If it’s too good to be true, all these clichés apply to this situation. I’m 40 and for the first time in my life I’m going to be a home owner. Someone close to me asked me why it took me so long to purchase a home. I felt very disappointed in that person because they were always trying to live above their means, buying cloths and hiding them from their spouse, that person was my mother. I learned a very important lesson, and that is – the harder you work for something the more you appreciate it. I’m a single mother with two kids that I practically raised by myself and I’ve already started teaching them this lesson. Personally I feel like more people should be arrested and not just the family of Madoff, but some of the early investors. I believe that a lot of them knew what was going on; they chose to ignore it because they were reaping great benefits. Don’t cry wolf know.