Friday, December 12, 2008

It's Time To Abolish the SEC

This is all you need to know about the Securities and Exchange Commission. Bernard Madoff put out a shingle as an investment advisor, instead of investing the money that was placed with him, he ran a huge Ponzi scheme. How big? $50 billion in losses.

As the multi-decade scam went on, WSJ is reporting that a complete outsider, a Boston money manager with no audit power, no subpoena power, nothing, Harry Markopolos, smelled a rat. For the last 10 years, he has been writing and otherwise contacting the SEC asking them to investigate Madoff. He told the SEC that Madoff couldn't possibly be making the profits he was reporting. Let me repeat, he has been contacting the SEC for 10 years begging them to investigate Madoff. Nothing happened.

Further, CNBC's Charles Gasparino reports that some hedge fund advisers were advising clients to stay away from investing with Madoff. The signs were there.

The SEC was clueless.

How did the SEC finally break the case,and bring charges yesterday? Madoff's sons walked into the offices of the SEC and said, "Our father just told us he has been running a Ponzi scheme and that he ripped off $50 billion."

Bottom line, the SEC is a political institution, it doesn't react to a Boston money manager who might be on to something, it reacts to politics.

It will run a show trial involving Mark Cuban.

It will pose as a battler of the financial crisis.

A complaint from a Harry Markopolos? Who the hell is Harry Markopolos? Put that at the bottom of the inbox. Hey, who knows, they might have gotten to it in year 11.

The only way you would have been protected from Madoff, was not from looking at SEC filings Madoff made (Oh yeah, he filed with the SEC and just made stuff up.), but by turning to wizened traders like Markopolos, who know what kind of profits can and can't be made, and what the explanation for those "profits" could really be.

The SEC won't even bust Social Security for the Ponzi scheme that it is.

You just need to go to the internet to find out the truth about SS.

Chris Cox and the SEC are jokes. The SEC should be closed down today.


  1. How is Social Security a Ponzi scheme simply because payroll taxes collected today are used to pay current beneficiaries? That's a completely sustainable model as long as the working population is big enough to support the retired population. This will hit a bump with the baby boomers which is why Social Security has been accumulating a huge surplus since the 1980s to handle the boomers.

    The fact that the surplus was spent like general fund revenue in exchange for treasuries was dumb policy but not a "scheme" unless you believe the government should default on T-Bills held in the Social Security trust fund but not the same T-Bills owned by private investors and foreign countries.

    Ponzi schemes always crash down because they are not designed to be stable, generational commitments. They pay big returns to early investors to ignite the feeding frenzy of new investors needed to sustain the fraud so the fraudsters can reap their profits. Madoff was unique in the longevity of his scam but he had unique circumstances (extreme credibility as former head of NASDAQ and the discipline to offer relatively realistic returns; it was only the consistency of those returns that were unrealistic). Madoff was offering 8% to 15% annual appreciation for perhaps decades. In contrast, your typical pyramid scheme offers much higher returns and flames out quickly. We had such a ring in Phoenix back in 1994 that promised to pay participates $10,000 for a $1,000 investment after four week. The scam collapsed after 3 months.

    Social Security doesn't need to attract new investors, it mandates investment from all workers and it doesn't promise appreciation, rather it is somewhat progressive so that poorer workers get a higher return and higher-wage workers get a lower return. Hence the promises to current and future payers are not illusory even if their money is paying beneficiaries rather than going into an account.

  2. @ UofAZGrad

    You seem like a bright sheeple. You understand what a Ponzi Scheme is. You explain in your first paragraph a Ponzi scheme, i.e., paying current "beneficiaries" out of future victims.

    Do you drive around with a tiny flag flying from your car?

  3. SEC-Fed crime brokerage SOX, Cox!