Book Review 245: The Madoff Chronicles

THE MADOFF CHRONICLES: Inside the Secret World of Bernie and Ruth, by Brian Ross. 269 pages. Hyperion, $19.99

In “The Age of Turbulence,” one of the most embarrassingly silly autobiographies ever written by an American, Alan Greenspan wrote (in September 2007), “the first and most effective line of defense against fraud and insolvency is counterparties' surveillance. For example, JPMorgan thoroughly scrutinizes the balance sheet of Merrill Lynch before it lends."

Fifteen months later, Americans learned about Bernard Madoff.

You might suppose that after Madoff made a mockery of the shibboleths of unrestrained finance capitalism for over 40 years, public figures would no longer speak about the evils of regulation. You would be wrong.

Although Brian Ross's “The Madoff Chronicles” is dated (it was published in 2009, before Mark Madoff killed himself), it is still worth reading because of the clear depiction of how stupid, oblivious, uncaring and reckless the leaders of finance capitalism were – when they were not simply crooks.

True, not all were complicit or taken in. An unknown number of financial institutions did do enough investigation to recognize that Madoff was a fraud. They refused to do business with him.

But these men, although smarter or at least more wary than the run of Wall Street, were only slightly less irresponsible and anti-public than the out-and-out crooks. Not one of these financial Paternos thought it appropriate to report a crime in progress.

(The exception was not an institution but an individual, Harry Markopoulos.)

Finance capitalism is like that. If the individual capitalist does well, somehow magically all the rest of us are supposed to also be incrementally better off, even if it appears somebody has robbed us of every cent.

Aside from his son Mark, apparently only two of Madoff's victims have killed themselves. Ross writes that both men were concerned about their personal honor in an old-fashioned way. Though Ross does not say so, the implication is that honor is as scarce as brains on Wall Street.

“The Madoff Chronicles” are gossipy and thinly sourced. Most of what is in here has also been in the daily press, but the book does provide a good snapshot of the shock and dismay that the Madoff crime created at the time.

That is, among people who believed in the bona fides of unregulated finance capitalism.

Those of us who believe that unregulated finance capitalism operates and is designed to operate as a continuing criminal enterprise were surprised to hear about Madoff, because we hadn't heard his name, but we were not surprised to learn what he had done.

When I say unregulated, I mean that in a practical, not legal sense.

Regulations were in legal effect, but Madoff's career – especially the part after he started to become a big player – was exactly congruent with Reaganism. Regulators were not encouraged to regulate.