Bernard Madoff the Events Surrounding Thesis

Excerpt from Thesis :

It appears that little will change under Obama, with the appointed head of the SEC, Mary Schapiro, similarly concerned with protecting Wall Street sharks.

James Petras (2008) similarly believes that Madoff's failure is not a personal one, but a failure of the current social, political and economic justice. In addition to an economic culture that most favors the very rich, Petras also believes that the SEC and its actions are completely predictable, precisely because the regulators are selected from those are regulated. Madoff was so successful for so long because he was able to play the fraud game better than others.

According to a radio interview conducted with (2008), Maurice Schweitzer explains the exact principles that worked together in enabling the Madoff scandal, as well as others like it. These principles include scarcity, authority, social proof, and the liking principle. According to the first, the client is told that the fund is closed, but the advisor nonetheless attempts to find a place for the investor. This creates a sense of exclusivity, which is one of the main features of the Madoff scheme. Secondly, Madoff had considerable authority in the field, being the chair of NASDAQ in 1990 and subsequently a board member. Authority figures are a social phenomenon that exert a large amount of influence over the social consciousness. They tend to be trusted with little or no question. Thirdly, the social proof principle is a phenomenon by means of which individuals trust whatever they see many others engaging in. Many high profile investors, including the Abu Dhabi Investment Authority, Stephen Spielberg, and the owner of the New York Mets, invested in Madoff's scheme. This attracted other high profile investors to follow suit, without any further investigation into the scheme or its merit. This type of merit is based solely on the actions of others and the appearance of legitimacy. The final principle that Schweitzer mentions is "liking." This is another social phenomenon, by means of which people are influenced by those they like. Social networking, country clubs and charity events played a key role in Madoff's ability to commit long-term fraud. Investors wanted to believe that Madoff's consistently high earnings were real, and they influenced each other in the perpetuation of this belief.

One could therefore conclude that it is not only the SEC or the government that is at fault in encouraging and perpetuating fraudulent schemes like that of Madoff. Indeed, it is the combination of both political, economic, and social paradigms that operate in the current social consciousness. To change this, the collective consciousness of society would have to change.

One might argue that the SEC and government can begin such change by operating on the principles of public trust and ethics rather than economic and political power. Instead of allowing fraudulent activities to continue, the structures that are elected to protect individuals and the public at large should in fact begin to their job as such.

It is a sad reality that this appears to be unlikely. Human beings are much too in love with money and power to ever allow an honest investigation of the very rich. Money and power are synonymous. Those in power and those with money will tend to work together in order to perpetuate their own status in the world. The public lets them do this, because it is impossible to believe that those with so much money and power could be no more than the image they display. Until the public consciousness regarding money and power changes, it will be impossible to impose honesty upon those who are there to uphold the ethical principle in economics.

Sources

Dey, Iain & Rushe, Dominic. (2008, Dec. 14). World's richest hit by Bernard Madoff. Times Online. http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5337735.ece

(2009, Jan 7). Radio Interview: The Bernard Madoff Case - Trust Takes Another Blow. http://knowledge.wharton.upenn.edu/article.cfm?articleid=2131

Lendman, Stephen. (2008, Dec. 26). Early Suspicions About Bernard Madoff. Global Research. http://www.globalresearch.ca/index.php?context=va&aid=11493

Petras, James. (2008, Dec. 20). Bernard Madoff: Wall Street Swindler Strikes Powerful Blows for Social Justice. Dissident Voice. http://www.dissidentvoice.org/2008/12/bernard-madoff-wall-street-swindler-strikes-powerful-blows-for-social-justice/

Zambito, Thomas & Smith, Greg B. (2008, Dec. 13). Feds say Bernard Madoff's $50 billion Ponzi scheme was worst ever. Daily News - NY Crime. http://www.nydailynews.com/news/ny_crime/2008/12/13/2008-12-13_feds_say_bernard_madoffs_50_billion_ponz.html

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