December 16th, 2008 20:24 EST
The Bernard Madoff Scandal: A Devastating Blow For Wall Street
"A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from the profit from any real business."
When I lived in Oakland, CA I worked for a large insurance company, on my floor there were over a hundred employees. An office is a microcosm of society at large, and we witnessed everything: An amorous couple having sex in a stairwell, employees coming back from lunch higher than a kite, and financial shenanigans of all kinds.
If you work in a large office, sooner or later, one of your co-workers will try to persuade you to invest in a Ponzi scheme. I was approached on a couple of occasions, but I was able to resist the lure of "easy money."
I looked down on my colleagues who lost hundreds and thousands of dollars as greedy and ignorant rubes who got exactly what they deserved. But it turns out that even entrepreneurs and celebrities, who routinely invest millions, can be tricked into investing in a Ponzi scheme.
Bernard Madoff, the money manager who was arrested last week in the Mother of all Ponzi schemes bilked many famous celebrites. Here is a partial list of his famous victims:
U.S. Senator Frank Lautenberg
Norman Braman, former owner of the Philadelphia Eagles Football Team
Fred Wilpon, owner of the New York Mets
You would think that these celebrities and captains of industry would recognize a Ponzi scheme, but these financial wizards along with many others got taken in for a combined total of a staggering $50 Billion.
Madoff wasn`t a con artist with slicked-back hair who operated out of a storefront, he was one of the most powerful and respected men in Wall Street.
"He (Madoff) has been active in the National Association of Securities Dealers (NASD), a self-regulatory organization for the U.S. securities industry. His firm was one of the five most active firms in the development of the NASDAQ, and he served as its chairman of the board of directors, and on its board of governors."
Dear Lord, if the former chairman of the board of directors of Nasdaq is a crook, who the hell on Wall Street can you trust?
This Ponzi scheme could not have been exposed at a more inopportune time, the stock market is reeling from its most devastating losses in decades. The state of the economy is at its worst point since the Great Depression.
Economics is not my forte, but I don`t think that Wall Street can fully recover from the many blows it has been dealt this year. I wouldn`t advise anyone to invest in the stock market, you have better odds at the Las Vegas casinos, some of them which allegedly are run by mobsters.
To hell with the stock market, haven`t your retirement funds already taken a big enough hit? A Certificate of Deposit (CD) is the way to go, your money will be safe.
"A CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions.
CDs are similar to savings accounts in that they are insured and thus virtually risk-free; they are "money in the bank" (CDs are insured by the FDIC for banks or by the NCUA for credit unions)."
My pension is a hostage to the perils of Wall Street, and there`s nothing I can do about that. But I can guarantee you that I will never invest my personal funds in the stock market, and I urge all Americans to avoid the market like the plague.