Thanks to Bernard Madoff: The Villain America Needed
Dear Mister Madoff:
Before it’s too late, I wanted to thank you for all that you’ve done for America. It’s been reported that Thursday you will plead guilty to 11 criminal charges, meaning you will spend the rest of your life in jail. A legacy like yours should not go unmarked as you fade into history.
And so I’m writing you this letter to honor your contributions to American society. I’m not speaking about the thousands of people you’ve defrauded. Nor am I referring to the (less than) $50 billion you made evaporate overnight. And those two people you caused to commit suicide? Disgraceful, of course, but not all that you should be remembered for.
I, unlike the rest of our compatriots, will choose to exalt your gifts, not just your sins. Like the way you single-handedly forced Congress to acknowledge just how crappy the SEC is at doing its job. Like when your downfall helped unearth a dozen other Ponzi schemes, proactively saving millions of dollars. And I, for one, do not think you’re only the basest kind of American—a man driven by greed, power, and an unchecked case of OCD. No, you, sir, are an American patriot. Your selfless sacrifice is overlooked by the hate-first-think-second mass media. You gave the American people somebody to despise when they needed it most. In our economic era, you may not have been the villain we wanted, but you were the one we needed.
Bernie—may I call you Bernie?—you arrived at just the right time. In December, when you admitted your fraud, we Americans were spewing anger, but it wasn’t directed at anyone in particular. President Bush? He was on his way out of office, and we had already vented our frustrations at the polls. The CEOs of subprime lenders? Countrywide was absorbed by Bank of America; Fannie Mae and Freddie Mac belonged to us, the very people they helped ruin. Wall Street? Too many CEOs, all of whom you could call greedy only if you understood what in God’s name a credit-default swap was.
But then you descended from the Lipstick Building: a middle-aged, extremely wealthy white guy from New York—exactly the demographic at which Main Street wanted to direct its scorn. (Your Judaism probably didn’t hurt.) Instead of conning via derivatives, you conned through deceit. And we can understand deceit. That you had nothing to do with the root cause of our economic crisis didn’t matter. You messed with Elie Wiesel, and when you screw with Holocaust survivors, it doesn’t matter what kind of financial villain you are. You were evil. Case closed.
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But that’s all surface-level. I believe your real use came in the kind of scam you were running. If I may put it so baldly, Bernie, you made wealth disappear overnight. Money that your clients thought was there actually wasn’t. This is the same thing that happened to homeowners when the housing bubble burst. And it’s the same thing that happened to investors when the Dow started its death march. Even though your clients were mostly rich, we could sympathize with their loss, because it was a proxy for our own. We found common ground in our hatred of you.
Bernie, this all sounds awful, I know. But there’s a reason I’m dragging you through this painful retelling of your greatest sins. We needed to be united, Bernie, and without you we wouldn’t have been. The real cause of our financial meltdown is too nuanced, too impossible to cause total agreement across the country. You, however, were different. You gave us an easy target—a man who was selfish, greedy, and indiscriminate in his destruction. You offered an outlet for our frustration, and now your life sentence gives us a small piece of justice to cling to in these dark, hopeless days of the recession. You were our catharsis. That the Dow jumped 380 points—5.8 percent—on the day you pleaded guilty is surely coincidental, but I choose to see it as a collective rallying cry: You may take away our retirement funds, but you will never take our financial freedom!
When a scapegoat was needed, you were there.
And, Bernie, it’s not all intangible. Your legacy has left us with lasting, concrete effects as well. Let’s look at your shamed nemesis, the SEC. Before you came on the scene wearing your iconic (and, frankly, awfully smug) grin, the SEC was a rotting corpse waiting to be unearthed. We knew SEC Commissioner Christopher Cox—he of the inept short-selling ban and John McCain’s ire—was asleep at the till, but we didn’t realize the SEC was as well. Your arrest in December not only showed that the SEC couldn’t detect schemers; it proved that they couldn’t do it even if their tip lines were ringing in their ears. I speak, of course, of Henry Markopolos, a man you must admire for his dogged devotion to a single cause—your downfall. And we needed Markopolos for his perfect encapsulation of all that was wrong with the SEC: “too slow, too young and too undereducated.” In a perverse twist of fate, Bernie, you indirectly became your own kind of whistleblower.
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And it wasn’t just the SEC, but the entire regulatory morass that you helped expose. Part of the trouble in catching you was that the agencies investigating your Ponzi scheme kept passing the buck. The SEC pawned off responsibility to FINRA. Just in case you’ve purged their acronym from your memory as some sort of defense mechanism, it stands for Financial Industry Regulatory Authority. FINRA said it didn’t have the authority to do anything about your Ponzi and that only the SEC could do that. The SEC, meanwhile, was wishing you would just go away, which is why it gave you to FINRA in the first place.
But now changes are afoot. FINRA has created a whistleblower’s office to help monitor and act on fraud tips. The SEC, meanwhile, is undergoing a full review of its fraud procedures and has already changed some rules to allow for employees to issue subpoenas more easily in fraud investigations. And you’ve successfully pissed off Congress, which should help ensure the SEC remakes itself into an agency that can prevent men like you ever from doing this in the future. That the agencies already caught Allen Stanford is a promising step, one that may not have occurred without your downfall. Job well done, sir.
You have, quite simply, become the best kind of scapegoat: one who manages to inspire change while encapsulating an era’s hurt, pain, and frustration. Mrs. O’Leary and her cow permanently altered fire-safety regulations in this country. Typhoid Mary helped expose our woeful lack of preparation in public-health crises. Kenneth Lay’s opaque ledgers at Enron personified corporate greed, which inspired new transparency legislation.
Without you, Bernie, we would have stewed in our internal anger. And we would have had nobody to catalyze change for the future. Know that while you spend the rest of your life in jail, I’ll be thinking of these noble contributions. And I’ll be thankful.
P.S. If you get this before you’re locked away, feel free to e-mail me at Chadwick.Matlin@gmail.com. I’m eager to hear your thoughts.