News Cut: March 13, 2009 Archive

Victims or accomplices?

Posted at 6:43 PM on March 13, 2009 by Bob Collins (4 Comments)
Filed under: Economy

Last month, in the now-famous Chicago Tea Party diatribe, CNBC's Rick Santelli said the people who would be in line for some government help with their mortgages are "losers."

Yesterday,an anchor at the same network suggested Bernie Madoff should be "waterboarded" and pointed out that his victims "did nothing wrong."

Is there a parallel?

Yes, according to Joe Nocera of the New York Times. He writes today that Madoff had accomplices -- his victims:

"These were people with a fair amount of money, and most of them sought no professional advice," said Bruce C. Greenwald, who teaches value investing at the Graduate School of Business at Columbia University. Mr. Hedges said: "It's like trying to do your own dentistry. It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances."

And that's the point. People did abdicate responsibility -- and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it.

What happened to the victims of Bernard Madoff is terrible. But every day in this country, people lose money due to financial fraud or negligence. Innocent investors who bought stock in Enron lost millions when that company turned out to be a fraud; nobody made them whole. Half a dozen Ponzi schemes have been discovered since Mr. Madoff was arrested in December. People lose it all because they start a company that turns out to be misguided, or because they do something that is risky, hoping to hit the jackpot. Taxpayers don't bail them out, and they shouldn't start now. Did the S.E.C. foul up? You bet. But that doesn't mean the investors themselves are off the hook. Investors blaming the S.E.C. for their decision to give every last penny to Bernie Madoff is like a child blaming his mother for letting him start a fight while she wasn't looking.

Sound familiar? It's victims as partial contributors of their demise.

Under Nocera's theory, are those of us who've lost our retirement savings victims, too?

(Recommended reading: Tonight's NewsHour on PBS looked at the role of the business press in covering the meltdown, including the assertion that stories were covered, but ignored.)

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