Economist James Galbraith: Economists Should Move into the Background, and "Criminologists to the Forefront"

University of Texas economics professor James K. Galbraith previously said that fraud caused the financial crisis:

You had fraud in the origination of the mortgages, fraud in the underwriting, fraud in the ratings agencies.

Senator Kaufman said last month:

Fraud and potential criminal conduct were at the heart of the financial crisis.

Congresswoman Marcy Kaptur says that there was rampant fraud leading up to the crash (see this and this).

TARP overseer Elizabeth Warren suspects fraud as the cause of the crisis.

Yves Smith has shown that fraud largely caused the subprime crisis.

Janet Tavakoli says that rampant fraud and Ponzi schemes caused the financial crisis.

Read on....

Bernard Madoff Psychic Profile: Peggy Rometo on Where the Money Went and More

Where did Madoff stash the billions? How much did Ruth know? Does the former NASDAQ chairman feel any shame?

Bernard L. Madoff, the man who masterminded what is believed to be the largest Ponzi scheme in history, was jailed yesterday after pleading guilty to 11 charges including securities fraud, wire fraud, mail fraud and money laundering. The disgraced Wall Street trader, who said he was "deeply sorry and ashamed" for swindling investors out of $65 billion, will face 150 years behind bars when he is sentenced in June. We asked wOw Intuitive Peggy Rometo how it all came to pass — and what’s in store for America’s most hated villain.

wOw: How did it all begin?

Peggy: My feeling is that Madoff was approached by an underground group, possibly originating in Argentina or somewhere else in South America, to find a simple, creative way to make some extra money. I think he saw it as easy, conceptual, no big deal. It all began with an offshore investment and willing partners. He felt very protected within this network, and well hidden from the law.

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Blame the Enablers

I couldn’t agree with this article more: Madoff Enablers Winked at Suspected Front-Running. I look at Madoff as a Sociopath — he is a sick individual. The enablers, on the other hand, were simply greedy hacks who didn’t, (and probably couldn’t) do the suitable investigation and due diligence into Madoff’s asset management business.

Were they Corrupt? Incompetant? Both? Who is to say. The bottom line is they lost all of their clients’ monies, and need to be held accountable.

Excerpt:

If the 70-year-old money manager was running a con, then his marketers like Access International, wittingly or not, were part of the scam.

Read on...

And still Madoff is the only one under arrest. Anyone get the idea that the whole system is corrupt? Tom

Madoff's fund may not have made a single trade

Fri Jan 16, 2009 6:55am EST
By Jason Szep

BOSTON (Reuters) - Bernie Madoff's investment fund may never have executed a single trade, industry officials say, suggesting detailed statements mailed to investors each month may have been an elaborate mirage in a $50 billion fraud.

An industry-run regulator for brokerage firms said on Thursday there was no record of Madoff's investment fund placing trades through his brokerage operation.

That means Madoff either placed trades through other brokerage firms, a move industry officials consider unlikely, or he was not executing trades at all.

Read on...

And of course the pundits on CNBC are still warning against having too much regulation. Not only was there not enough regulation under Bush, there was zero enforcement. Total financial collapse and how many people have been arrested? Tom

Meet Lady Subprime

By Richard CohenTuesday, January 13, 2009; Page A15

The French have the comely Marianne, the British have the fetching Britannia, and we have the welcoming Lady Liberty. May I now suggest, at least for the duration of the current recession, a new feminine emblem of our times: Marvene Halterman of Avondale, Ariz. At age 61, after 13 years of uninterrupted unemployment and at least as many years of living on welfare, she got a mortgage.

She got that mortgage less than two years ago. She got it even though at one time she had 23 people living in the house (576 square feet, one bath) and some ramshackle outbuildings. She got it for $103,000, an amount that far exceeded the value of the house. The place has since been condemned.

Read on...

If you're having trouble understanding how the world's finanical system got sucked into a black hole of derivative debt, this is a fairly readable explanation. This is why almost every financial institution in North America is bankrupt. This is the kind of junk that is probably sitting in UofT's, GM's and most pension plans. Tom

Austria’s ‘Woman on Wall St.’ and Madoff

By NELSON D. SCHWARTZ and JULIA WERDIGIERPublished: January 6, 2009 VIENNA —

With an aggressive style that stood out in the staid world of Austrian banking even more than her bouffant red wig, Sonja Kohn made few friends gathering billions for Bernard L. Madoff from wealthy investors in Russia and across Europe.

Now, she has even fewer. Mrs. Kohn has dropped out of sight, leaving the firm she founded, Bank Medici, in the hands of Austrian regulators, who took it over last week.

Embarrassment from investing heavily with Mr. Madoff could explain wanting to disappear from public view. But another theory widely repeated by those who know Mrs. Kohn is that she may be afraid of some particularly displeased investors: Russian oligarchs whose money made up a chunk of the $2.1 billion that Bank Medici invested with Mr. Madoff.

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Nice to know the good company the UofT pension plan was investing with.....Russian Oligarchs. I guess a piddling little $4 or $5 million investment doesn't require any due diligence. Drop in the bucket. Tom

Madoff Scandal Threatens Country’s Criminal Justice Organizations

Posted by Dan Slater

Tallying the losers in the Madoff scandal has become somewhat of a parlor game. On the legal front, we’ve seen the New York Law School emerge as an alleged victim. But the criminal justice system is reeling, as well.

Earlier this month, the JEHT Foundation — a major financial supporter of the Innocence Project in Texas, among others — announced it would shut its doors in January because its prime donors invested with Madoff. JEHT, according to this Business Week article, is a six-year-old New York City-based philanthropy focused on juvenile and criminal justice, human rights, and election reform.

Read on...

The fallout from the Madoff Ponzi Scheme gets weirder and weirder. BTW the geniuses running UofT's pension plan just reported that the plan lost 4 or 5 million dollars that was invested with Madoff. Tom

Bernie Madoff's Shady Schemes Should Have Set off Alarms Long Ago

By Arianna Huffington, Huffington Post. Posted December 15, 2008.

One ponzi scheme after another is exposed on Wall Street, and so far all we've heard is: "Who could have known?"

See if this sounds familiar:

An ambitious and risky undertaking carried out with hubris, and featuring the weeding out of anyone who raises alarm bells, little-to-no transparency, an oversight system in which no central authority is accountable, and the deliberate manufacturing of ambiguity and complexity so that if -- when -- it all falls to pieces, the excuse "who could have known?" can be used….

Is it Iraq? Fannie Mae? Citigroup? Bernie Madoff?

The correct answer is: all of the above.

Read on...