Minyanville attacks deregulation vis-a-vis Bernie Madoff in the article "Deregulation to Blame for Madoff Fiasco". Now while chock full of rather illogical statements which might be better left ignored, a dissection of this article does highlight some misconceptions in regards to regulated vs. unregulated markets.
Madoff senior was charged with a single count of securities fraud. He was released from prison a few hours later after posting $10 million bail. If convicted, Madoff faces 20 years in prison and a fine of $5 million. His list of victims includes Steven Spielberg, New York Mets owner Fred Wilpon, and the European bank HSBC
The question arises: How did this happen?The answer is quite simple: Madoff’s investment firm was allowed to operate for 2 years without regulation from the SEC.
Well here's at least a very basic error. Madoff's swindle spanned far more than two years. If this is a mis-type, and they meant to say 20 years, then the statement is false as there was SEC oversight, with an investigation in 1992 to prove it. Madoff was even advising the SEC...
Odd, isn’t it? Diamond miners in the Congo are subjected to body-cavity searches to prevent them from secreting tiny gems - but savvy, ambitious men like Madoff are allowed to wander around unsupervised, carrying diamonds the size of fists. And we pretend to be shocked when some of the loot goes missing.
Here’s a thunderbolt: There’s no such thing as a “free-market economy.” What does the “free” part of it mean? I have found no convincing explanation.
Wasn't sure to even include this one, admittedly. While indeed there is currently no country which can provide an example of a 100% free-market economy, most economics books nevertheless can explain what a free market economy means, this should be obvious to most and for perhaps another post. Anyhow, some businesses operate in effectively free market environments. Moving on.
Every financial system requires rules and regulations to function. The PR coup of the “free-market economists” is that they managed to convince the American public that only little people need rules.
I predict, as the case goes to trial, that coverage will focus on Madoff’s personality flaws, the warning signs, and his dramatic fall from grace. But that’s trivial. What’s important, and worth discussing, is that Americans are so deathly afraid of “regulation” that we meekly allow ourselves to be swindled.
Now, the WSJ does a far better job at explaining this last post and at delivering an overall rebuttal to this Minyanville post, than I can do here. (Madoff and Markets)