Monday, December 15, 2008

More financial regulation needed

12/16/08 Terry Bankert

The bad news: Current PONZI Scheme King Bernard L. Madoff, former Nasdaq Stock Market chairman and founder of Bernard L. Madoff Investment Securities has ripped off trusted clients for $50 billion. Thats $50,000,000,000.00 . Like an unlicensed garage mechanic he ran an unregistered money-management business.

The good news: This $50 billion figure is only what clients were told they had in their accounts at the firm, not the amounts they originally invested. Madoffs advisory business catered to rich people and institutional investors as well as hedge funds, was “all just one big lie.”

Its been broke for years.

Special thanks are in order for Ronald Reagan for de regulation.

What can we learn from the devastation of Madoff on the private wealthy who flocked like lemming to his high rate of return?

These wizards of finance and scions of privilege are months away from a McDonalds grill job or being a Walmart greeter and receive no pity here. What can we learn from this 1% that has been doing it downhill into our lives.

But again we just might pick up some of these lost investments of the rich. Once again we will bail out the greedy rich while auto workers starve. Really greedy rich people should be excluded from the Securities Investor Protection Act, or SIPA.

We should ask what is wrong with the the business model of funds of hedge funds – which run about $685bn in assets. Just where was the the Securities and Exchange Commission's and its oversight of the investment management industry.

I can just hear the whinning at the congressional hearings. Something must have went horribly wrong for a fraud on such a scale. Barney Frank will play the blame game.

The speaker of the house will be distracted with hand-wringing. The bureaucrats will cart in rewritten rules Audit regulators will spout we told you so.

This predators company ,an investment-advisory business ,was in the gun sights of oversight by the SEC in 2006, they blew it. Other traders said nobody can be as good as Madoff the money people just wanted their profits.

Now Predator Mr Madoff was not a hedge fund manager they were his prey. His profits made all the hedge fund look good so they kept shoveling their client money to him and banked their commission based upon non existent gains.

We need change in this industry. Scrape the current fee structure . Create one that affects everybody good and bad times. The manager should lose when the fund goes down as well as gaining when it goes up.

We need more regulation. The regulatory agency typically examines only 10% of the new funds that are registered. That is not good enough. Madoff did not have a world class auditor looking at him. What are the odds that there was not an arms length relationship.

Rumor has it that rivals to Madoff raised concerns about the fund in 1999.

Our country needs hedge fund manager registration rules. Congressman Barney Frank, D-Mass., is on it stating he plans to introduce new hedge fund manager registration legislation. We will need more staffing for the oversight agencies. Government must control the extremes in our society.

Those extremes of human need and here human greed must be controlled by government. We need professionals in government. We must respect them so they will want to work for us.

What has happened to our country by the breakdown in the self policing controls of a not so free market should end forever the howls for smaller government of those greedy parasitical predators in the financial community.

Or at least we should never listen to them again.

Posted here by Terry Bankert

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