Monday, March 08, 2010

Makropolos II

Bogged down in grading today but I do want to do a followup on Harry Makropolos' fine book about his pursuit of Bernie Madoff. Here are some not-very-well-connected loose ends:

One: I said it was two stories--one, Harry v. Madoff and two, Harry v. the SEC. There's also a third story: specifically, the book offers a fascinating-to-an-outsider view of life inside the securities industry. Note for starters that Harry's quest (at least in the early years) was not strictly an abstract pursuit of justice: rather, he was trying to back-engineer Madoff because his bosses told him to. They wanted him to come up with a competing product so they could horn in on Madoff's business. Makropolos came round to the view that it couldn't be done; his bosses weren't happy, but at least now he had a powerful with the inducement to go forward with the chase.

And indeed I would infer that this has been the story of the securities industry, if not forever then at least for the last 20-30 years. Bernie Black (UT Law) used to say there were two ways to make partner at biglaw: one was to invent a new security and the other --well, nobody ever made partner any other way so nobody could remember the other. I did and do wonder whether that was true at biglaw: but I assume at least it was true of bigfinance.

Another point: reading Makropolos, I find myself oscillating between "nobody knew" and "everybody knew," with a tendency towards "everybody knew." Indeed it reminds me of one of the first great frauds I ever knew anything about: the "great salad oil swindel," where a small-time hustler named Tony DeAngelis made himself (for a while) a lot of money by peddling tanks of salt water (note to file, oil floats just because your dipstick comes up viscous doesn't mean that it's viscous all the way down). In salad oil, one has the sense that lots of people figured that the fix must be in but that maybe they could scrape some money off the table before the cops came.

Harry seems to think along those lines regarding Bernie: a lot of people seem to have smelt a rat. He's particularly arch with the old European aristos who (he says) appear pretty clearly to have believed that Bernie made his money dishonestly, but were perfectly comfortable with a scheme that filled their pockets, as long as it didn't require their fingerprints.

A final thought: I don't want to seem ungenerous about Harry who comes across (at least in his own account) as a hell of a fellow, but I can't help but wondering--okay, granted the terminal dopiness of the SEC, could it have been any other way? Could Harry have broken through their wall of invincible ignorance if he'd been a little smoother, a bit more manipulative? Could he have worked a bit harder at taking it to the press? And mopst tantalizing of all (though I can't find the ref at the moment)--at one point, an FBI man says something lie "you should have come to us." And what if he had? Oh my, what if he had?

1 comment:

Margaret said...

I think it was Monday, March 8 that Jon Stewart interviewed Makropolos about his book. Perhaps, if Makropolos had been in the GOP old-boy network he would have gotten some traction with the SEC, which was repopulated by anti-regulation appointees whose duty was to prevent the SEC from doing its job.

Similarly -- no antitrust enforcement occurred during 2000-2008 and about half of the IRS department of attorneys hired to sue wealthy tax cheats was fired in 2006. The New York Times ran an article Sunday, July 23, 2006, page 13, with details -- leaked from inside the IRS. An IRS spokesman acknowledged that because of the Bush tax cuts on estate and gift taxes, the IRS didn't need so many of those specialized attorneys -- despite the fact that for each hour they worked, they brought in an average of $2,200 of taxes owed. Way too productive for that administration.

I have to wonder, however, if the current administration has made any progress in reinstituting regulation.