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Is it possible to argue that Bernie Madoff did a lot less direct fiscal harm than many (most?) legitimate investment companies that were unwound at that time?

Is it possible to argue that Bernie Madoff did a lot less direct fiscal harm than many (most?) legitimate investment companies that were unwound at that time? I suggested this at the time and got a lot of flak (from family members).

bertil 8y ago
The judicial process focuses on how “purely” what you did was harmful, rather than the overall impact. Otherwise, no one could scale any project: you’d do too much harm right away. What kills the most people around the world are more likely treatments for common, dangerous disease, cures that have known secondary effects (most likely chemotherapy). Pharmacists who develop those know that and test them against the (considerable) harm that would happen without it; those with a seemingly positive balance are approved, not those that are the least toxic. Same thing: the bank that does the most terrible decisions is probably the one with the most customers, not the one built with nothing but criminal intent. Otherwise: you are probably right, but it’s not relevant to judge banks overall. If you find clusters of bad behaviour (even in large banks) you probably want to focus on those, but not blame the whole institution right away: people, companies still need banks, and you wouldn’t find an honest banker if your criteria is “no harm at all”.
snarf21 8y ago
I think it is possible and also very true. IMO, the reason this is treated different is two fold. One, it gives everyone a fall guy and is intended to be a deterrent for any other individual to try to do the same thing in the future. Two, the large investment companies and companies that rated their vehicles have lots of culpable people but it was all systemic. Which of the 1000 people involved should go to jail? I know it would have caused major problems but we should have let them fail. We are in an even worse position now with companies that are even much too big to fail and they've been trained that the government will bail them out if mistakes are made.
rb808 8y ago
Agreed, if you were an investor in Citi, Merrill Lynch, Bear Stearns you would have lost nearly everything. Madoff customers did much better.

bertil 8y ago

The judicial process focuses on how “purely” what you did was harmful, rather than the overall impact. Otherwise, no one could scale any project: you’d do too much harm right away. What kills the most people around the world are more likely treatments for common, dangerous disease, cures that have known secondary effects (most likely chemotherapy). Pharmacists who develop those know that and test them against the (considerable) harm that would happen without it; those with a seemingly positive balance are approved, not those that are the least toxic. Same thing: the bank that does the most terrible decisions is probably the one with the most customers, not the one built with nothing but criminal intent. Otherwise: you are probably right, but it’s not relevant to judge banks overall. If you find clusters of bad behaviour (even in large banks) you probably want to focus on those, but not blame the whole institution right away: people, companies still need banks, and you wouldn’t find an honest banker if your criteria is “no harm at all”.

snarf21 8y ago

I think it is possible and also very true. IMO, the reason this is treated different is two fold. One, it gives everyone a fall guy and is intended to be a deterrent for any other individual to try to do the same thing in the future. Two, the large investment companies and companies that rated their vehicles have lots of culpable people but it was all systemic. Which of the 1000 people involved should go to jail? I know it would have caused major problems but we should have let them fail. We are in an even worse position now with companies that are even much too big to fail and they've been trained that the government will bail them out if mistakes are made.

rb808 8y ago

Agreed, if you were an investor in Citi, Merrill Lynch, Bear Stearns you would have lost nearly everything. Madoff customers did much better.