On the five-year anniversary of Bernie Madoff outing himself as the world's most notorious white-collar criminal, the financial world still hasn't learned some simple lessons.
First, business journalists should stop listening to the fraudster himself. His multibillion-dollar scam caused at least three people to take their own lives, including his son Mark — yet Madoff remains mostly unrepentant and uncooperative. He continues to blame "the greed of others" and loves to offer his opinions on how Wall Street really works.
That wouldn't be so bad if Madoff pulled a Sammy "the Bull" Gravano and came clean about his misdeeds by giving the investing world a blow-by-blow analysis on how he was able to carry out his grand ripoff. But so far he hasn't, and I think he never will.
No, his chats with reporters are mostly self-serving bromides lacking in real news or insight.
Think about this logically: Madoff spent years not trading a single stock, while doing little more than duping investors and directing a handful of clerks about how to falsify records. He might know more about how modern finance really works than most business journalists, but that's not saying much.
In other words, let's stop making Bernie feel like he's something better than a lowlife crook.
Another lesson unlearned: All the regulation in the world can't and won't prevent another Madoff. This is important to understand as our watchdogs put the finishing touches on the Dodd-Frank reforms that supposedly will prevent another banking crisis or Madoff from happening.
Don't count on it. Our government watchdogs would love the investing public to believe Madoff was a criminal mastermind, who slipped through the cracks and went unnoticed because of his genius for deception — and would've been caught if there were just more bureaucrats looking for fraud.
Nothing could be further from the truth. Market participants had for years questioned Madoff's bizarrely high and consistent returns as an aberration that could only be replicated through a fraud. Some smart journalists reported as much, and the Securities and Exchange Commission heard those warnings and looked at Madoff's controversial operations several times.
How did Madoff manage to keep the scam going? The SEC officials failed to use their common sense and check if he'd ever placed even a single trade. "We came close," one official concedes, "but we never followed through."
In other words it doesn't take the vast Dodd-Frank law, or the new Consumer Protection Agency or the hiring of hundreds of even more brain-dead regulatory bureaucrats to catch a crook. It takes common sense, including on the part of the investing public.
I've covered Wall Street for more than 20 years, and the best thing you can say about the so-called watchdogs at the SEC or the Justice Department is that they usually swoop in after the damage is done. Remember, Madoff turned himself in five years ago today after amassing a $50-billion-plus ripoff and running out of victims to keep his scheme going; he wasn't caught.
That means it's up to average investors to realize BS when they see it. It's not all that hard when you think about it. Madoff was offering his "clients" a too-good-to-be-true proposition: No losses and steady gains, which is a tell-tale sign of fraud.
Ditto for the Wall Street firms that pressured brokerage clients to buy Internet stocks on the notion they'd keep going up in value despite not making a profit. Or the boiler-room dopes who appear in the upcoming "The Wolf of Wall Street," as well as all those mortgage brokers who allegedly took advantage of people by helping them get loans for homes they couldn't afford, only to have them foreclosed upon when the bills came due.
What they were really taking advantage of was greed — yes, average people are greedy too. They believe in homes or stocks that keep going up and never come down, and that type of greed always leads to disaster.
Truth be told, I'm one of those reporters who spoke to Madoff in the years since he turned himself in. He banned me from contacting him in prison after I concluded a couple of years ago that he's a delusional sociopath. It was one of the proudest days of my life.
Good riddance, Bernie.
Charles Gasparino is a Fox Business Network senior correspondent.
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