The Wizard of Lies, Henriques - B

                                          Thanks to Marcella for recommending this fascinating book.   It tells the story of Bernie Madoff's massive Ponzi scheme, how he pulled it off, the devastating consequences for him, his family and investors and tries to come to some conclusions about it.
                                          Madoff was very bright and, almost to the end, ran a concurrent successful brokerage business from the same set of offices he ran the Ponzi scheme.  He was a pioneer of consolidating and computerizing the NASDAQ. He was respected on Wall Street and should have been able to be content with his success. He got sloppy with the money he "ran" and lapsed into deceit and fraud  to cover the losses.  The attractiveness of his fabricated returns appealed to  investors, large and small, American and foreign, sophisticated and un.  No one ever checked very hard or due-diligenced anything.  They simply trusted Bernie.  The SEC failed  when it followed up on a number of tips and didn't uncover the scheme when they clearly could have by asking a few simple questions.  Then again, this was the era when the markets were suppose to be self-regulating, when the SEC's budget was being cut, it's staff run off, and it's Commissioner who didn't believe in government.  Things finally fell apart for Madoff in the 2008 market turmoil.
                                        The one hero of this story is Irving Picard, the lawyer and bankruptcy trustee, who tried to unearth what had been done and collect back as much money as he could.  He took the position (a logical one upheld by the Courts) that in a Ponzi scheme, where no stocks or investments were actually purchased, that the measure is cash in/cash out, not the fabricated profits on phony account statements. It's amazing how many argued the other way, litigated it, and begged for relief from the government.  Although the matters are in litigation and will be for years, it appears as if Picard will get people a lot more of their money back than anyone expected.
                                        I do not agree with the author's conclusion that the government should protect people from their inability to make investment decisions. She says people are too gullible and put their money in places based on trust.  Even if you regulate hedge funds, crack down on derivatives and properly fund the regulatory bodies, you can't eliminate greed, naivete or change human nature.