The Madoff Bailout is starting to evolve beyond comedy.[1] Clearly the pressure to bail out the victims of the Madoff Ponzi will be irresistible,[2] but since the real deal has yet to surface Doomers will have to content themselves with conjecture and rumor for now. This unconfirmed source [3] claims to have heard a definite figure for the down-payment through the grapevine:
The real story is what’s going on over at the Treasury, Federal Reserve and Congress. This trio has already spent, “loaned” or committed 8.5 trillion dollars to the economic problems plaguing our country. It appears the carnival of money printing is nowhere near ending. Now, there is even talk of another government bailout for the people who were ripped off by Madoff. This plan proposes to recapitalize SIPC, the Securities Investor Protection Corporation, with 15 billion dollars to augment its paltry 1.5 billion dollar insurance pool to protect investors. I guess 1.5 billion does not go very far when the pool of cheated customers is 50 billion dollars deep. Where do all these bailouts stop? America, in my view, has gone from a capitalistic society to bailout nation in little more than a year.
That sounds about right. My own guess is that every penny of fraudulently conveyed fairy-gold gets TARP’d into reality over the next few years. Returning a bit less than a third of the losses up front should keep most investors going for the time being. Perhaps Congress can sweeten the deal with some tax rule cjamges [4] so that Madoffers can maintain their customary returns while they plan for more modest gains over the next while 
UPDATE: As if the situation isn’t grim enough, here’s a plausible back-of-the-envelope analysis [7] suggesting essentially all the Madoffers’ money has already been dissipated in the feeder funds’ fees and other administrative expenses:
Now comes the really bad news for Madoff’s investors. On those assumptions, the net flows of actual cash since 1998 – new money in, redemptions and fees out – come to only $600m or so, an average of $60m a year. That’s a figure that seems consistent with what has emerged about Madoff’s lifestyle. And even if it’s all recoverable, it’s only just north of a penny for each dollar investors thought they had.
LATER: This FT story [8] high-lights the intensity with which this affinity fraud devastated the Modern Orthodox community, while providing some insight into how this was effected.
Jacob Ezra Merkin, known as Ezra, has not been charged with any crime. However, several investors have sued him, including New York University, which said it had lost at least $24m as a result of investing with Madoff via Mr Merkin’s Ascot Partners fund.
Mr Merkin managed $5bn in several funds. His Gabriel Capital Group was mostly a hedge fund of funds, which invested in Madoff, and he also ran two hedge funds, Ariel and Ascot Partners, which acted as feeder funds to Madoff.
He was on the boards of at least half-a-dozen major non-profit organisations, most of which also invested with his funds – a practice which contravenes conflict of interest guidelines recommended by governance experts.
SIPC is already warning that they’ll likely need a bailout just to honor their traditionally paltry fraudulary make-goods.[5]
The next step would then be a progressive relaxing of those limits. Getting votes for this should be easy. Can anyone in Congress confidently say they haven’t received significant tainted funds over the last couple of decades? The Madoffers were contributors of legendary generosity to all sorts of worthy causes, including political ones from all over the spectrum.
After all, perhaps that $15 billion number is just a reverberation from this month-old conflation of Madoff with the size of the auto sector bailout.[6] I have little doubt, however, that the Madoffers’ losses are coming soon to a tax bill near you.
————————
[1]: "Bailout Madoff!", by Brady Willett, GoldSeek, January 16, 2009.
With the financial markets already in a state of panic and the global recession expected to worsen in 2009, we can ill afford to allow the financial institutions, charities, and rich idiots that entrusted Bernard Madoff with their money to go bust. As for the widespread contention that since Mr. Madoff committed fraud he deserves to go to jail, do not think of Madoff as operating a ponzi scheme so much as a Strong Armed Perception Fund (SAP Fund), and don’t think of him as breaking the law so much breaking new ground in the arena of fictitious returns.
[2]: "Foundations help nonprofits hurt in Madoff affair", by Rachel Beck, AP / MSNBC, January 6, 2009.
Human Rights Watch did not invest directly with Madoff, but like many others it was hit by Madoff-related losses at the Betty and Norman F. Levy Foundation, a large backer of social causes.
[3]: "The Madoff Sideshow", by Greg Hunter, iStockAnalyst, January 9, 2009.
[4]: "For Victims of Schemes, the I.R.S. Can Be Flexible", blog edited by Andrew Ross Sorkin, New York Times, January 7, 2009.
[5]: "Madoff scheme may hurt investor protection fund: Bailout warning told from SIPC", by David R. Sands, Washington Times, January 6, 2009.
[6]: "Bernard Madoff Investors Will Get Bailout", Scam.com, December 15, 2008.
Bailout seems to be the word in 2008: Everyone is getting one, or is giving their case for why they need one. In the latest bailout request, the Alternative Investment Management Association (AIMA) is asking for aid for the investors burned in the $50 Madoff investment scam according to Reuters. On the news we have heard heartfelt stories of retirees who lost everything, but then again these were supposed to be sophisticated investors. What should we do?
…If we aren’t willing to spend $15 Billion to bailout the auto industry, then we can’t spend billions to bailout wealthy hedge fund investors who got burned. …
[7]: "Bernard Madoff victims shouldn’t hope for refunds: Bernie Madoff’s effort to sneak $1m-plus of jewellery to family members suggests he has a few assets", by Richard Beales, Telegraph, January 7, 2009.
[8]: "The pivotal ‘Rabbi’ in Madoff’s fundraising", by Deborah Brewster and Henny Sender, Financial Times, January 7, 2009.
Mish's Global Economic Analysis
Northern Virginia Housing Bubble Fallout
Ohio Fraudclosure
Bubble Meter
UK House Bubble
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
Comments are now closed.