That Wall Street fella has quite a lot:
Nine cars, six houses, and a great big yacht –
Designer clothes and all that rot,
He’s plumb lost track of all the stuff he’s got.
Go beg in the street and live in a shack,
You ain’t ever gonna get your money back.
Go barefoot wearin’ a gunny sack,
‘Cause you never will get that money back.
The Wall Street fella made a company
And then said ostentatiously
“If you’ve got money, then give it to me,
“and watch it grow phenomenally.”
Go beg in the street and live in a shack,
You ain’t ever gonna get your money back.
Go barefoot wearin’ a gunny sack,
‘Cause you never will get that money back.
People invested without a care
Every dollar and franc and euro there.
Each thought they were gonna be a millionaire,
Then the market tumbled with a great big scare.
Go beg in the street and live in a shack,
You ain’t ever gonna get your money back.
Go barefoot wearin’ a gunny sack,
‘Cause you never will get that money back.
To the Wall Street fella the suckers fled
Sayin’ “Quick, Mister Money Man, gimme my bread,”
But the Money Man laughed and shook his head,
Thumbed his nose with a grin and then he said:
“Go beg in the street and live in a shack,
“You ain’t ever gonna get your money back.
“Go barefoot wearin’ a gunny sack,
“‘Cause you never will get that money back.”
What a shake, what a shock, what an awful scream,
What a great surprise! Who could have seen
That the genius of the American dream
Was slippery swindler with a Ponzi scheme?
Go beg in the street and live in a shack,
You ain’t ever gonna get your money back.
Go barefoot wearin’ a gunny sack,
‘Cause you never will get that money back.
– The Mighty Chickadee Calypso Androgyne and Her 100% He-Man Esso Steel Band
“There’s a Lara d’Bardonecha Martini waiting on Line Two,” Gretchen discreetly informed me shortly after I bid farewell to an Indian client who had spent a couple of hours with me discussing ways to avoid annihilating Pakistan over what happened recently in Mumbai. “Is she… a relative?”
“My mother, actually,” I responded. “Put her through.”
Mrs. Martini: Hello, Tom? Is that you?
Tom: Yes, Mom, it’s me. How are you and Dad doing?
Mrs. Martini: Not so bad, considering how you, Rose and Rob never call.
Tom: Ah, come on, Mom, we do so call you and Dad!
Mrs. Martini: On our birthdays, at Christmas and Easter…
Tom: We call on your wedding anniversary too, don’t we?
Mrs. Martini: Yes, I suppose you do.
Tom: Mom?
Mrs. Martini: Yes? Who is this?
Tom: It’s your son, Tom. You called me about something.
Mrs. Martini: I did?
Tom: Yes, you did.
Mrs. Martini: I did what?
Tom: You called me about something.
Mrs. Martini: Oh, yes, I remember now – I called you about the Scheissenthallers.
Tom: Who?
Mrs. Martini: Mr. and Mrs. Arnold Scheissenthaller. They time-share a condo with us in Miami Beach, and we arrived four days earlier than we expected because the travel agent made a mistake in our reservations at the Barcelona Hilton. So we checked in at the Hyatt Regency and decided to drop by the condo to see if the Scheissenthallers were still there, because last year, they left five days early, and we thought if they had done something like that this year too, well, we might as well stay at the condo instead of a hotel, since it is right on the beach.
Tom: That’s all very interesting, Mom.
Mrs. Martini: Oh, right – you’re wondering what the point of all that is.
Tom: Well, yes; not that it isn’t always great to talk with you, Mom, about just anything at all, but I am at work and there’s a client meeting scheduled to begin in a few minutes…
Mrs. Martini: I understand, dear. You see, the reason I’m calling is, when we went to the condo, there was all this ruckus all over the place – ambulance, police cars and God knows what else – people in uniforms running around in every direction. So, at last, I find poor Mrs. Scheissenthaller and she’s hysterical, Tom, just hysterical.
Tom: I see. Why?
Mrs. Martini: Why what, dear?
Tom: Why was Mrs. Scheissenthaller hysterical?
Mrs. Martini: Oh, yes, I was just getting to that, Tom. She was hysterical because Mr. Scheissenthaller had tried to hang himself in the bathroom.
Tom: Hang himself?
Mrs. Martini: That’s right – from the shower head in the bath tub.
Tom: But he lived through it?
Mrs. Martini: Yes, Tom, he did. They said that, although he was short enough to use the shower head as a gallows, he only fell a couple of inches when he jumped off the edge of the tub and that wasn’t enough to break his neck.
Tom: So he started to slowly strangle instead. I bet he went into convulsions and tore the shower head right out of the wall.
Mrs. Martini: Why, that’s right, Tom!
Tom: And then he hit his head on the wall tiles and it knocked him out cold, which is how his wife found him.
Mrs. Martini: Exactly! Goodness gracious, my little boy is so smart! Anyway, the upshot of it is, the doctors say he should make a full recovery.
Tom: Okay, I guess now I’m supposed to ask why he did it.
Mrs. Martini: Yes, Tom, you are.
Tom: Very well, Mom – why did Mr. Scheissenthaller try to hang himself in a Miami Beach time-share condo bathroom?
Mrs. Martini: Because of that terrible Bernard Madoff man! We were waiting at the hospital while they worked on poor Arnold, and Naomi…
Tom: Naomi is Mrs. Scheissenthaller, I take it?
Mrs. Martini: Yes, Tom, that’s right. Naomi told me how a friend of theirs at their synagogue introduced them to a gentleman who invited them to a big gala Madoff’s firm put on down here to entertain potential investors. And when they went to it, everyone treated them like movie stars or something, with photographers all around and red carpets and velvet ropes and this fancy dinner. She said it made Arnold light up like a solid gold menorah, whatever that is, in Bergdorf’s window. After all that, they had a floor show and then a big presentation on Madoff’s investments. Arnold was so impressed, he put all the cash the Scheissenthallers could spare into it. That was several years ago, and by last January, she told me they had nearly tripled their money. Then the credit markets started to freeze up in February, and they started to worry that maybe they should cash in, but their account representative kept talking them out of it, until finally, when the stock market collapsed in September, Arnold put his foot down and demanded the money. Then they started stalling, saying that they had liquidity problems because everybody was asking for their money at once, and could the Scheissenthallers wait just a little bit longer, please? And so it went, she told me, until last week, they were watching the news and found out that Madoff was running something called a Ponzi scheme with his investors’ money. Then, the day before yesterday, Arnold determined for certain that he and his wife were completely wiped out, and this morning, he tried to hang himself.
Tom: That’s tragic; just completely tragic, that’s all I can say.
Mrs. Martini: Who’s Ponzi?
Tom: Charles Ponzi was… an entrepreneur… I guess, who started a business trading in things called International Postal Reply Coupons. Theoretically, it was possible to make actual monetary profits by purchasing them in Europe and selling them in the United States, but Ponzi never really did that. Instead, he convinced people to invest in an arbitrage firm he named the Securities Exchange Company which supposedly had that business model, but instead of engaging in legitimate trades, he simply took new investors’ money and paid it to previous investors, calling it “profit.” As long as there was a growing supply of new investors pumping money into the scheme, Ponzi could appear to be generating better profits than almost any other business opportunity. That appearance of huge profitability spurred new investors to him in droves. By mid 1920, he had millions of dollars and used it to buy a bank to go with his mansion and luxury automobile. At its height, his “investment company” was raking in over a quarter of a million dollars a day. Then somebody noticed that the amount of money people had given Ponzi’s company, had it been legitimately invested in International Postal Reply Coupons, would have put over one hundred and sixty million of them in circulation – while the total number of IPRCs ever actually produced and circulated was less than thirty thousand. When that news got out, the supply of suckers dried up and Ponzi first went flat broke, then went straight to jail.
Mrs. Martini: And that’s what Madoff was doing, pretending to invest people’s money in those international postal reply coupons?
Tom: No, Mom, there aren’t any such things anymore. Madoff was pretending to invest in various equity and debt-based securities.
Mrs. Martini: Are those any better than international postal reply coupons?
Tom: A year ago, a lot of folks would have said so. Today, I’m not so sure. After all, you could buy a stamp with an international postal reply coupon, and these days, there are plenty of securities you can’t do a damn thing with because nobody, anywhere, will buy them.
Mrs. Martini: Really? Why not?
Tom: Well, there are lot of reasons, but primarily, nobody will buy them because nobody knows what, if anything, they are actually worth.
Mrs. Martini: And this Madoff character, all that’s his fault?
Tom: Oh, no, Mom, Madoff’s not responsible for worthless credit default swaps, auction rate securities or derivative instruments. There are thousands of financial professionals, all over the world, who are responsible for those things.
Mrs. Martini: And those things, how are they different from what Ponzi and Madoff did?
Tom: Ah, let’s see here… well, in order for Ponzi or Madoff to take money from Person A as an investment today and disperse it to Person B as a putative profit on an investment Person B made last month, last year, or whatever, Ponzi and Madoff had to commit embezzlement. By contrast, financial professionals trading credit default swaps, auction rate securities, derivatives and the like used those instruments as a legal basis to disperse dividends to Person B with money they got from Person A’s investments in them.
Mrs. Martini: But behaving like that is wrong no matter what, isn’t it?
Tom: I’d say so, Mom. Sure – absolutely. No matter how you disguise the activity, taking money from one person under the pretense of investing it and then paying it to a person who gave you money previously under the same pretenses and leading that second person to believe that the funds they are receiving constitute some kind of “profit,” when, in fact, no transactions generating any kind of actual wealth occurred, is definitely wrong.
Mrs. Martini: So embezzlement is illegal, but what the financial professionals trading those “instruments” were doing, that isn’t illegal?
Tom: Not at the moment.
Mrs. Martini: What do you mean, “at the moment?”
Tom: Um, you see, Mom, a lot of that stuff, like credit default swaps, for instance, was made illegal after questionable Wall Street shenanigans caused the last great depression, back in the 1930’s.
Mrs. Martini: So what happened?
Tom: Reagan, Bush, Clinton and Bush again. Twenty-eight years of so-called supply side, so-called free market, so-called neoclassical economic ideology, amply funded by wealthy, greedy scumbag industrialists and financiers, slowly eroding all the protections put in place since 1929. PACs, lobbyists, business development deals, envelopes of cash – whatever it took to get Congress to play along, they used it. Eventually, all the laws meant to prevent another depression were repealed.
Mrs. Martini: Repealed? Why?
Tom: Because people like Milton Friedman, Arthur Laffer and George Stigler whored themselves out to the rich and powerful, who used their half-baked normative theories as pretexts for dismantling anything that stood in the way of raw, unbridled multi-national corporate welfare masquerading as “free market global capitalism.”
Mrs. Martini: And after Congress repealed all those laws…
Tom: … and the Securities and Exchange Commission fell asleep at the switch…
Mrs. Martini: …there was nothing to stop avaricious idiots from blowing up the economy and sending every decent hardworking productive person in this country to the poor house, just like they did in 1929?
Tom: Right, Mom; and that’s exactly what happened. Michael Milken and Ivan Boesky with the junk bond collapse of the 1980’s; the hedge-fund debacle of the 1990’s; Ken Lay and the Enron affair; Worldcom bilking investors – every time the criminals took advantage, it was in the name of “free markets” and “getting government off the backs of the guys who are smarter than the regulators.”
Mrs. Martini: You know what hearing that does? It makes me downright ashamed to be an American!
Tom: Yeah, me, too.
Mrs. Martini: But despite all that deregulation and repeal of all those laws, what Madoff did was still illegal, right?
Tom: Yeah, the editorial board of the Wall Street Journal may have convinced Congress to remove the fire wall between investment and commercial banking that had been in place for sixty years, but even they couldn’t convince Congress to repeal the laws against embezzlement. Which isn’t to say the editors of the Wall Street Journal don’t think that making embezzlement legal is a viable supply-side, neoeconomic, free-market strategy, of course. Given what they write most of the time, I wouldn’t be terribly surprised if they did.
Mrs. Martini: And Madoff knew what he was doing was illegal?
Tom: Bernard Madoff is the former head of the NASDAQ stock exchange. Of course he knew what he was doing was illegal – which is more than you can say for Ponzi. He thought everything he did was perfectly okay and went to his grave proclaiming to anyone who would listen that he’d done nothing wrong.
Mrs. Martini: So Ponzi was insane?
Tom: That depends.
Mrs. Martini: On what?
Tom: On whether you consider sociopaths to be insane. The courts don’t. Sociopaths can plead insanity if they want to, of course, but they always lose because they can’t pass the McNaughton Test – at the time of the crime, they know the difference between right and wrong.
Mrs. Martini: So are all those monsters on Wall Street a bunch of sociopathic criminals and bumbling morons?
Tom: Oh, I wouldn’t go that far. I’m sure there must be an honest, competent financial professional working somewhere or another, and I’m just as sure he or she is generally regarded as a complete failure, too.
Mrs. Martini: My God, what next? Are the bankers going to start stealing money from our savings accounts?
Tom: Why should they bother? We all have credit cards, don’t we? And the banks can increase our credit card interest rates to any precentage they want, any time they feel like it, whether we pay on time or not, and whether or not we have good credit ratings, too.
Mrs. Martini: Bankers! The way they behave, it’s enough to make you start stuffing money under your mattress!
Tom: Well, I’d say a few grand under there might help a lot of people sleep better these days.
Mrs. Martini: It’s a disgrace, that’s what it is. The financial business in this country is a national disgrace!
Tom: And a pathetic one at that. So what about the Scheissenthallers?
Mrs. Martini: Oh, right, dear. That’s the reason I called you, isn’t it?
Tom: I think so.
Mrs. Martini: You know how proud we are of you, Tom – I’ve told Naomi, so many times, about how you’re a policy consultant in Washington, so while we were waiting there at the hospital to hear about Arnold, she asked me if I could call you up and get your take on this Madoff business.
Tom: Sure, Mom – my take is, Madoff is a lying, thieving criminal who should spend the rest of his life in solitary confinement. And so should his family.
Mrs. Martini: His family?
Tom: The ones who worked for him, anyway. It strains credulity that Bernard Madoff, alone and unassisted, committed the embezzlement of fifty billion dollars. My take is, they should lock them all up and throw away the key.
Mrs. Martini: I’ll be sure to tell Naomi that, but I think perhaps she’d be more interested in hearing from you about how she and Arnold can get their money back.
Tom: Let me make sure of the facts before I answer that – did the Scheissenthallers invest directly in Madoff’s company, or did they invest in a third party that invested in Madoff’s company?
Mrs. Martini: Why should that matter?
Tom: Because if they invested in a third party firm that invested in Madoff’s company, there’s already at least one class-action suit in progress – against Gabriel Capital, a fund that invested in Madoff’s scheme, and there will probably be plenty more class action suits against other firms like Gabriel Capital, such as Ascot Partners, for example. If that’s the situation, the Scheissenthallers could join one of those suits and attempt to recover their money that way.
Mrs. Martini: No, I don’t believe they did that, Tom. I distinctly recall Naomi telling me that Madoff was very highly thought of in New York Jewish circles, and that investing directly with him was some kind of status symbol.
Tom: That’s unfortunate, to say the least. I’m afraid that, if they invested directly with Madoff, the Scheissenthallers are most likely S.O.L.
Mrs. Martini: S.O.L.?
Tom: That’s a technical term used extensively in the financial sector. It means “at pecuniary loss without recourse.”
Mrs. Martini: So why is it abbreviated “S.O.L.?”
Tom: It’s, uh… tradition, Mom. The origins are lost in the mists of time, like why the bull is the symbol for increasing stock price trends and the bear is the symbol for decreasing ones. Nobody can tell you exactly why.
Mrs. Martini: Okay, then, she said I should make sure to ask you if they could apply for coverage with the Securities Investor Protection Corporation and get back at least five hundred thousand.
Tom: Not unless they went through Madoff’s broker-dealer entity, and it’s my understanding that nearly all of Madoff’s investors went directly through his advisory entity instead.
Mrs. Martini: And that matters?
Tom: Yes, because direct investment with Madoff’s advisory entity circumvents fiduciary due diligence requirements for the broker-dealers who are members of the SIPC.
Mrs. Martini: Well, I’m sure glad my clever son has an MBA in finance and understands all this crazy stuff, because it’s sure terribly confusing to me.
Tom: That’s very nice of you to say, Mom.
Mrs. Martini: You’re welcome, Tom. Naomi told me she and Arnold feel so stupid, getting taken by this Madoff guy.
Tom: Well, they shouldn’t! Madoff fooled a lot of people who you’d expect to be much more sophisticated than the Scheissenthallers. I’m looking at a list of institutions affected by the Madoff Ponzi scheme that I just pulled up off the Internet. There’s Austin Capital Management, who take care of the Massachusetts State Pension Fund; Bank Medici – and that’s really ironic, since the Medici’s invented modern banking; Kingate Global, the Chais Family Foundation, Union Baincare, various French mutual funds; the Fairfield Greenwich Group, in for half of its total assets; Banco Santander – that’s the largest bank in Spain, in for over two billion Euros; Tremont Holdings, HSBC Holdings, Fortas NV, Benbassat & CIE, a big private Swiss bank; Natixis, SA, a big French bank; the Royal Bank of Scotland – maybe a bit more talk and a little less action would have worked better for them this time; BNP Paribas, the biggest bank in France; Dexia, SA, a big Belgian bank; the Man Group, a big British hedge fund; Nomura Holdings, Japan’s biggest brokerage firm; Aozora Bank Limited, a big Japanese bank; Unicredit SBA and Ubi Banca, two big Italian banks; Nordia Bank, the biggest bank in Scandinavia; Royal Dutch Shell – why they were screwing around with Madoff when they should be out looking for oil, I can’t figure, but there they are; and, what’s this – the Town of Fairfield Connecticut Employees’ Pension Fund! How about that? Madoff was literally robbing widows and orphans! And the list just goes on, and on, Mom. Top-notch financial enterprises, every one, except for the occasional endowment, charity, energy, high technology or telecommunications giant. So the Scheissenthallers are in very good company.
Mrs. Martini: I know – Naomi says Madoff took Steven Spielberg, Elie Wiesel, Mort Zuckerman, Frank Lautenberg and the Yeshiva University to the cleaners, too.
Tom: Oy, gevalt!
Mrs. Martini: What’s that, dear?
Tom: Just a little Jewish figure of speech.
Mrs. Martini: Oh, I wouldn’t know. I don’t speak Jewish.
Tom: Yiddish.
Mrs. Martini: I thought the people out in the street over in Israel speak Jewish.
Tom: That would be Hebrew. And modern Israel is the only place in the entire history of the Jews that “people out in the street” have spoken Hebrew. Not even Jesus or his apostles did that – they spoke Aramaic.
Mrs. Martini: Do tell? Well, anyway, it doesn’t look like Naomi and I are going to have very much good news for Arnold when they take him out from under sedation. I hope he doesn’t just turn right around and die from a heart attack when we tell him.
Tom: Right – because then, Naomi would have to pay the hospital bill for his attempted suicide anyway, and looking at that and realizing she has to shell out all that money for nothing…
Mrs. Martini: “Oy, gevalt!” And then she keels over with a heart attack herself, I bet.
Tom: Probably.
Mrs. Martini: Well, anyway, I’m sure glad we never invested any of our money with that terrible Madoff man.
Tom: Don’t be so sure you haven’t, Mom.
Mrs. Martini: What do you mean?
Tom: You should check with every investment firm you do business with and find out if any of them invested in Madoff’s Ponzi scheme. Because if they did…
Mrs. Martini: Tom, I insisted that we cash in on all our investments last March! So we’re safe, aren’t we?
Tom: Not necessarily.
Mrs. Martini: What are you talking about?
Tom: The Commodities Futures Trading Commission versus Bayou Management LLC, Samuel Israel, et al.
Mrs. Martini: Samuel Israel? Isn’t he the guy who was in the papers and on TV for trying to fake his own death to get out of going to prison for securities fraud?
Tom: Yeah, but it’s not that court case, Mom. It’s the one where the government went after him for securities fraud in the first place – and it’s that case which is very important with respect to the Madoff Ponzi scheme.
Mrs. Martini: So, I should care about it because, why?
Tom: You remember that list I was just reading from?
Mrs. Martini: Not all of it, dear.
Tom: Any of the names sound familiar?
Mrs. Martini: Ah, yes, we had quite a bit tied up in Fairfield and, um, Tremont, too, I think.
Tom: Well, Mom, the judge in CFTC versus Bayou set a very significant precedent.
Mrs. Martini: He set a precedent? What precedent?
Tom: The court ruled that any of the investors who made money from Bayou Management’s illegal activities and got out before it collapsed have to give all that money back!
Mrs. Martini: What? Was the judge nuts or something? That’s ridiculous!
Tom: Nuts, maybe; ridiculous, perhaps; but that’s the law, Mom.
Mrs. Martini: Oy, gevalt!
Tom: I hear that’s what a lot of people said about that ruling.
Mrs. Martini: I’ve got to hang up now, dear.
Tom: Got all the information you need, then?
Mrs. Martini: I don’t know if I do or not, Tom, but I’m absolutely sure I’ve got all the information I can stand to hear at the moment. So you take good care of yourself and give my best to your girlfriend Cerise.
Tom: Sure. Say hi to Dad for me.
Mrs. Martini: I will; and believe me, that’s all I’m going to say.
Tom: Good plan. And merry Christmas!
Mrs. Martini: Oh, no, don’t think you’re getting out of calling us for Christmas just because I called you six days before!
Tom: Of course not. ‘Bye, Mom.
Mrs. Martini: Goodbye, dear.