You couldn’t dream up a better villain. Bernie Madoff, the man we all love to hate, is back in the news, opining from his jail cell on matters political, ethical and financial, this time in an interview with Politico magazine.
Madoff won’t win many friends with this new interview, and may even gain a few more enemies. Yet our fixation on him as the villain of the 2008 financial crisis is erroneous, counterproductive, and even immoral.
By now, you probably know the facts. Madoff, once the darling of the American Jewish upper crust, was convicted in 2009 of running a massive ponzi scheme. When the pyramid collapsed, dozens of individuals and many Jewish institutions lost everything they had “invested” with him.
Those victims will be pleased to hear, perhaps, that Madoff says he has “nothing to live for.” Although many said in 2009 that Madoff could never atone for his crimes, he has suffered greatly since: one of his sons committed suicide, another is in jail, and another is battling lymphoma. His wife barely speaks to him. Surely, no matter how much money was lost, Madoff has now lost more.
Yet that’s not the part of the interview that’s made headlines. That honor goes to Madoff’s statement that “I don’t feel that I betrayed the Jews, I betrayed people… I betrayed people that put trust in me — certainly the Jewish community. I’ve made more money for Jewish people and charities than I’ve lost.”
Ouch. This after Madoff’s fraud bankrupted or severely hurt Yeshiva University, Hadassah, the Jewish Community Centers Association of North America, the Elie Wiesel Foundation for Humanity, and the Chais Family Foundation. Add that to Madoff’s kvetches about his sentence (“For all intents and purposes, it’s a life sentence” – duh) and the boredom of prison life, and it’s hard not to loathe the guy.
But Madoff the man is less important than Madoff the symbol. And that’s where we’ve gone off the rails.
In the six years since the world’s financial markets crashed, Madoff has become a symbol of the collapse. He’s an easy villain: a liar, a thief, and someone whose regret remains, even today, equivocal. And even though many of Madoff’s victims have recovered much of their original investments, many others – including vulnerable, trusting bubbes and zaydes, lost everything.
Many more people, however, lost much, much more in the 2008 financial crisis. And Madoff had nothing to do with it. That crisis was brought about by Republican-engineered deregulation of the financial industry, which enabled enormous mergers and incentivized financial institutions to take on too much risk. New security “products,” themselves ponzi schemes of derivatives upon derivatives, were sold by supposedly trustworthy banks and financial advisers to customers who didn’t want to miss out on the next big thing.
And while many in the industry were swept along by the current of usury, many others knew it was all a shell game. Infamously, for example, Goldman Sachs bet against the very securities they were selling to their clients.
Eventually, like Madoff’s scheme, Wall Street’s house of cards collapsed. But who went to jail? Nobody. Most of the big banks were bailed out (“too big to fail”), and the major malefactors of great wealth settled with the government. They wrote it off.
Most likely, the 2008-09 bailouts rescued the world from global economic collapse – not to mention the U.S. automotive industry. They were a very good thing, Occupy’s outrage notwithstanding. But they also went through without teeth, enabling business-as-usual bonuses to be paid to financial service executives, and, with only a modicum of additional regulation, business-as-usual risk-taking to resume with hardly a hiccup.
Oh, and it gets worse. How has the 1% done in the last five years? Just fine, thanks. More than fine. In 1983, at the height of “Greed is Good,” the wealthiest 1% made about 131 times the median income. Now, they make 225 times the median. That same 1% controls over 30% of the wealth in the United States – with the next 9% controlling another 30%. That’s 60% of the wealth owned by 10% of the people.