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Tuesday, June 30, 2009

Suspension of Disbelief

When phony-baloney Rolex watches began appearing on the sidewalks of New York in the late 1980s, the peddlers of the things seemed to have all learned from the same script; touting the things, usually priced between $5 to $10, as the genuine article and when asked by incredulous, if gullible, customers how they could be so cheap, replying in the few words of English they knew, sotto voce: "Maybe stolen?"

They weren't, of course, merely cheap and nasty knockoffs from China, bought from jobbers on the Lower East Side for a couple of bucks apiece. The sidewalk watch salesmen knew, however, merely hinting the shoddy "Rolex" watches they hawked might be hot would blind many potential dupes to their obvious shortcomings and they would fork over their cash. (I will confess, it was heaps o' fun standing back a few feet and watching those swindlers operate.)

So it is, on a much grander scale, with the gullible souls who lost their fortunes to Bernard Madoff. The New York Times has a sob story today about some of those victims and their unhappiness with Irving H. Picard,
the court-appointed trustee charged with gathering what is left of Mr. Madoff’s assets, [accusing him] of flouting the laws by not honoring their claims with the Securities Investor Protection Corporation, which insures customers when brokerage firms fail.
In other words, the dupes want compensation (from us, the taxpayers) for their investments that went up in smoke. It is an absurd request; they had ample reasons to avoid Madoff like the plague but chose not to.

Madoff's fund claimed to make money year after year, in good markets and bad, contrary to any other fund on Wall Street. Shouldn't those investors have been just a teensy bit suspicious of that? Madoff was tight-lipped on his investment strategy and entrusted oversight of his billion dollar operation to a two-bit upstate New York shopping mall accountant. Might that have raised eyebrows of some of his investors? There were murmurings for years Madoff was a slippery character, not to be trusted. Did no alarm bells go off in the heads of those investors, who surely must have heard at least some of those reports and could have done a little digging?

Most of Madoff's investors were not widows and orphans, innocent to the wicked ways of Wall Street, rather people or institutions of means who craved even more means. The attitude was: "I don't want to know how he makes his money so long as he makes me money." That is precisely what the scammer counts on in a potential mark: suspension of disbelief made possible by a larcenous or greedy nature. While we must be sorrowful for those many poor souls who lost everything they had to Bernard Madoff, we must also be mindful that they, ultimately, bear the blame for not asking themselves every now and then if it all seemed too good to be true.

(h/t For What It's Worth)

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