The World Gone Madoff

When I did my recent post about Governor Blagojevich, one of the commenters challenged me for lumping all governors and executives in the same bad guy category. I didn’t mean to do that, although I have no doubt that some of them aren’t much different from the Illinois governor.

The challenging comment got me to thinking, however. Maybe I have been too hard on politicians and CEOs lately. Maybe there are more good apples than bad ones. It’s not fair to say that just because an executive has done well and made a lot of money, he’s dishonest. As a matter of fact, the Wall Street Journal is running a series this week on the good CEOs of 2008.

On the verge of being chastened, I then read an article in Slate Magazine about the recently discovered massive fraud of Bernard Madoff. The point of the article is simple. What Bernie Madoff has done, together with the CEOs vilified by the economic disaster caused by Wall Street investment banks and subprime lenders, makes it now impossible and imprudent not to be suspicious of anyone who’s wealthy or making a lot of money.

According to Slate, our present crisis wasn’t just caused by greed and ethical collapse. It was caused by living in a culture with extraordinarily high levels of trust, particularly trust of those who’ve made it big. “Madoff was trusted precisely because he was rich; because he was a member of the Palm Beach Country Club; because his company worked out of expensive Manhattan offices . . . .”

Slate predicts that this culture will now change, that our tradition of trust will be brought down. “In the coming years, American capitalism will become slower, more cautious, less productive, and less entrepreneurial.” I should also point out that the previously referred to commenter accused me of being overly influenced by the media, so here I go again. But I can’t help it. The article in Slate sadly makes sense — at least, to me.

I’m not sure the people who lived through and were scarred by the Great Depression ever got over it — ever again trusted banks, the Wall Street crowd, the rich. I think that’s where we find ourselves today. It may not be fair. It may not even be smart. But when you’ve been sucker-punched repeatedly by people who seem to have the same characteristics, it’s hard not to be overly suspicious, downright cynical.

1. 

   Frances says:

   December 19, 2008 at 11:10 am

   Crooks and con artists flourish at all levels of society. The ones at the Madoff level aren’t often publicized due to all parties shunning public disclosure of their complicity or stupidity. This criminal act is so large it is hard to hide. The facts indicate anyone who really asked questions and used common sense (as opposed to hoping everyone else was right) walked away to invest their money elsewhere because there seemed to be something if not actually wrong, just not quite right. Those who were caught in this scheme ignored warning signs because they either were ignorant or chose to invest with friends thereby relying on secondhand advice. Madoff should be punished to the full extent of the law and if possible his victims should be restored. Was it Reagan who said “Trust, but verify”?
2. 

   John Phillips says:

   December 19, 2008 at 3:22 pm

   Frances,

   Thanks for your comment. I believe Reagan did say “Trust, but verify,” usually in connection in his dealings with the former Soviet Union. It’s good advice for any kind of situation.

   I agree with your sentiment about some of those who invested with him, although the SEC had information that something was wrong and still didn’t do anything. I’m sure Madoff will be punished in some way, but there’s no way his victims, in whatever category they may fall, will be restored.

   Thanks again.

   John