Jane Haddam’s WordPress weblog

Odd Things, Done Oddly

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So, I’m going to skip the global warming stuff and go straight to Bernie Madoff, which at least interests me. 

And the answer, of course, is that a lot of the “money’ was not money at all, but fantasy.  You’d give Bernie your cash, and you’d get statements from him saying that your portfolio had increased by so much this year, and so much next, and on and on.

In reality, of course, there were no increases because there were no portfolios.  Bernie would take the cash, pay himself and his people, and pay those few people who decided they wanted to cash out.

But in spite of the fact that most people didn’t have the money they thought they had, they did, at one point, actually have money–a few hundred thousand here, a couple of a million there.  The charities that got ripped off frequently had to shut down altogether.  That was true of Wiesel’s foundation. 

And people, often financially unsophissticated people who had worked very hard for a very long time, made plans and decisions about things like retirement on the basis of what they had good reason to think was accurate and honest information.

But it’s remarkable, to me, how much of the present financial mess is about money that was never there to begin with.  It’s true in the subprime mortgage mess, too–the real problem (in terms of causing a systemwide failure) wasn’t the mortgages themselves, but the “financialization” of the mortgages, which meant that local banks did not have to worry about whether or not the loans they were making were viable–or they thought they didn’t.

Local Bank gives Deadbeat a mortgage, then bundles that mortgage into a package of them and sells that package as a “mortgage backed security,” like a stock.  Local Bank has its money back already, and the risk belongs to your 401K, which bought the “derivative” as an investment.

There’s something that would work as a murder mystery.

Written by janeh

January 16th, 2010 at 9:20 am

Posted in Uncategorized

2 Responses to 'Odd Things, Done Oddly'

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  1. “There’s something that would work as a murder mystery.”

    Nah. Actually stealing the money only works in a murder mystery as the crime someone is killed to cover up–and then you have to be able to explain to the readers how the money was stolen to make it clear that X stole it, and hence killed Y to conceal the theft. In this case, (a) it’s all legal, and (b) as for the explanation–well, have someone loan you the “House of Quark” episode of DEEP SPACE NINE, in which the Ferengi is trying to explain to the Klingons how exactly they’ve been ripped off. The Klingon warriors are working calculators in a mix of pain and bafflement.
    Unless the mystery involves a murdered financial manager and so many outraged clients the list of suspects fills two CDs.
    We are, in a sense, all Klingons now.

    Thomas Perry did one–DANCE FOR THE DEAD–about the S&L debacle, and had a pretty good explanation of the whole thing. But the point was just to provide a stash of illicit money to put a character in danger. It was a thriller, not a mystery.

    Didn’t mean to desparage the very real losses of money and expectation with Madoff. I just get tired of short summaries that make it look as though Madoff somehow made all the money he ever claimed to have under management vanish in a puff of smoke. A lot of it was smoke all along, and much of the real money invested–though not the dreams and expectations–can be recovered.


    16 Jan 10 at 5:31 pm

  2. Put me in the ‘financially unsophisticated’ category. I think I understand the basics of how Madoff and the mortgage selling (in the US) worked, but only because I’ve read a bit about both of them after the fact. Years ago I did listen to a few presenttions from financial advisors, and I never did understand what they were getting at – or, for that matter, have a clear understanding of how the proposed arrangements would work. I mean, I could see I was supposed to get interest, and I was sure I had to be paying fees, and I didn’t see how it all worked out so I would benefit. At that, I was better off than one of my late aunts who always swore that her advisor, whom she adored, didn’t earn anything from investing on her behalf. At least he appears to have been no Madoff, because when she died, no money was missing. And then you get in to stuff like borrowing money on your house so you get get more money elsewhere – I keep thinking ‘But it’s your HOUSE! What if you lose all that money!’.

    So I’m a bit with Robert here – it would all have to be explained very clearly, without boring infodumps, for it to work as a motive for a murder mystery, even though money is a great motive generally. I mean, quite aside from greed, money symbolizes a lot of things to a lot of people – security, success, status, the relatives who left it to them. Destroying any of those could be a motive for murder. But the reader has to understand how it was done.


    17 Jan 10 at 6:45 am

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